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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


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1  INDICTMENTS  AGAINST 
i    ALLEGED  DYNAWirTERS^j 

Here  are   two   indictments  brought 
against  the  three  alleged   dynamiters 
now  in  the  county  jail.     The  first  is 
For   murder   against   the   ^cNamaras 
and  others  for  alleged  dynamitirig  of 
I  the  newspaper  building  at  Broadway 
and   First  street,   and  is  a  sample  of 
fhe    19    similar   ones.      The    second    is 
igainst'TcManigal.   J.   J.   McNamara 
tnd  others  for  the  blowing  up  of  the 
Llewellyn   iron   works: 
"In   the   superior   court   of  the     ?>^ate 
of  California,  in  and  for  the  county 
of  Los  Angeles  roiifor- 

"The   people   of  the   state   ^f  Ca Ufor- 
n1i    nlaintlff    vs.  M.  A.  Schmidv,  J. 
B    •  McNamara,    J.   J.      McNamara 
William  Caplan,  ^ ol:inJyo^'^"'^^^'^ 
Roe,  John  Stiles     and     Jane     Doe, 
defendants.— Indictment. 
"The    Grand    Jury    of   Los    Angeles 
countv    m  the  name  and  by  the  au- 
thority of  the  people   of  the   state  of; 
California,   accuse    MA     ^^I^'  Wlf"i 
B    McNamara,  J.  J.  McNamara    ^11- 
Ham  Caplan,  John  Doe,  Richard  Roe- 
John  Stiles  and  Jane  Doe  of  murder,^ 
committed   as  follows: 

"Heretofore,   to   wit:      On   the   fu=ti 
day   of   October.   1910,   at   and   in   theO 
county   of  Los   Angeles,   ann   state   ofs 
California,   and  before   the   finding   ot 
this     indictment,     the     said     M.     A. 
Schmidt,   J.  B.   McNamara,  J.  J.  Mc> 
Namara  and     William     Caplan,     and 
John   Doe,   Richard   Roe.   John    StilesJ 
and  Jane  Doe,  whose  true  names  are, 
to    the    grand    jurors    aforesaid      nn- 
known,    did   the^   and   there   willfully, 
unlawfully,  feloniotisly  and  withmai- 
I  ice  aforethought,  kill  and  murder  one  |,) 
I  A.   Churchill  Harvey-Elder,  a  human  i 
being. 


"in  tne  superior  court  of  tne  stai-e  ui 
California,    in    and   for   the    county 
,     of  Los  Angeles.  ,„^^„.o 

"The  people  of  the  state  of  California, 
plaintiff,  vs.  O.  E.  McManigal    ^  J.  ] 
McNamara,  John  Doe,  Richard  Roe,  , 
John    Stiles    and   Jane   Doe,   defen- 
dants—Indictment. •  „  .^„ 
"The    grand    jury    of    Los    Angeles 
countv,  in   the  name  and  by  the  au-  ] 
thoritv  of  the  people  of  the  state  of 
California,    accuse    O.    E.    McManigal. 
J    J    McNamara,   John   Doe,   Richard 
Roe,'  John  Stiles  and  Jane  Doe.  wnose 
I^-ue   names  are   to   the   grand   jurors 
aforesaid   unknown,   of   the   crime    of 
maliciously  depositing  and  exploding, 
l^nd   ^tempting   to    explode  dynamite 
nitroglycerin,   nitrogelatin,   and   other 
'chemical    compounds   and   explosives, 
wiX  fntent    to    injure      and      destroy 
buildings,    and    to    injure,    intimidate 
and   terrify   human   beings,   a  felony, 
committed   as  follows: 

"Heretofore,    to-wit:      on    the    2othl 
day  of  December,  1910,  at  and  in  the 
county  of  Los  Angeles,  state  of  Call- 
Joraia    and  before  the  finding  of  this  1 
Indictment,  the  said  O.  ^^  McManigal 
J    J    McNamara,   John  Doe,   Richard 
Roe'  John   Stiles   and   John   Doe    did 
then    and    there   wilfully,    unlawfully, 
feloniously     and     maliciously  deposit, 
attempt  to  explode  and  explode  at    in, 
SndS    and    near    the    building,    office 
and    foundry    of    the    Llewellyn    Iron 
works,  a  corporate  body,  at  and  near 
the  comer  of  Main  street  and  Redon- 
do  street.  In  the  city  of  Lo«  A^g^les^ 
county  of  Los  Angeles,  state  of  Ca U-  > 
fornia  dynamite,         nitroglycerin, 

Slrogelatin  and  other  chemical  com- 
pounds  and    explosives,   with   the   in- 
tent  then   and    there    and    thereby   to  | 
iniure  and   destroy  said  building,  of - 
f?ce  and  foundry  of  the  said  Llewelyn 
Iron   works,    and      with      the      intent 
then    and    there    and    thereby    to    in- 
lure     intimidate    and    terrify    certain 
human  beings,  to-wit:     Reese  Llewel- 
?vn     John   Llewellyn.   William   Llew- 
ellyn,  David      E.    Llewellyn.      Walter 
Tavor       Sprigg     Harwood      and      the 
Sckholde?s,^%roprietors,   ^director-s 
and  emploves  of  said  Llewel^^n  lion 
works  In  the  said  building,  office  and 
foundry?  that  said  building,  office  and 
foundry  was,  then  and  there,  a  place 
wh^re   human   beings   usually   inhab- 
Ued,     assembled,    frequented,    passed 
and  repassed," 


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FOREWORD 

TO  SECOND  EDITION 

Wnen  -we  began  putting  the  text  matter  for  tnis  Course  m 
pamphlet  form,  instead  of  in  bound  volumes  of  books,  ana 
mailing  the  lessons  out  from  week  to  week  and  month  to 
montn,  a  fe^w  lessons  at  a  time,  we  anticipated  greater 
satisfaction  on  tne  part  of  our  students. 

But  we  \vere  not  prepared  to  expect  the  tremendous  re- 
sults which  we  have  really  achieved. 

Xne  percentage  of  students  wno  actually  keep  up  the 
Course  under  tbe  new  plan  is  over  THREE  times  as  great 
as  under  tne  old. 

Xnis  great  appreciation  of  the  Course  in  its  present  form, 
combined  with  tne  really  remarkable  satisfaction  our  stu- 
dents express  witb  our  PERSONAL  instruction  and 
INDIVIDUAL  attention  to  quizzers,  examinations,  and 
consultation  inquiries,  nas  caused  our  enrollment  of  students 
to  increase  by  leaps  and  bounds. 

Tne  result  is  tbat  tbis  second  edition  of  tne  Course  m 
tbis  form  is  made  necessary  almost  six  montbs  in  advance  of 
tne  time  we  bad  planned  for  it. 

It  is  w^itb  heartfelt  appreciation  of  tbe  good  w^ork  and 
co-operation  of  our  present  student-body  and  Avith  full  assur- 
ance and  determination  that  tbose  enrolling  nereafter  shall 
likew^ise  not  find  tbeir  confidence  in  us  misplaced  tnat  we 
offer   tbis    second  edition  of  our  Extension  Law  Course. 

A.  C.  BURNHAM 

President 
January  1911 


fV)f»rU<sn    E>L-WiSjI0O   -ScAioi^l     oT  Ldi^,  tSA-ccaAo 


A«nnun«tnp«t 


Amrrmm  Sxt^ttHinn  llntwratt^ 

(Non-Reaident  Instruction) 
CHARTERED  UNDER  THE  LAWS  OF  CALIFORNIA 


FRANK  C.  SMITH,  LL.  B.,  Dea* 


Covyrigbt  1910.  l>y 

THE  BRODIE  BURNHAM  CO. 

Lm  Aageln 


"Tke  great  proDiem  of  Ameriea   to- 
day is  ttat  of  ADULT  education." 
-Chas.  W.  EJiot. 


\a  ^  AMERICAN  EXTENSION  UNIVERSITY 

(non-resident  instruction) 
Chartered  u^er  the  Laws  of  California 


Officers  of  Administration  and  Instruction 
Trustees 
A.  C.  Burnham,  President 
DiAN  R.  Gardner,  Counsel 
A.  C.  Brodie,  Registrar 
M.  B.  Burnham,  Treasurer 
E.  V.  Gahan,  Secretary 


FACULTY 
DEPARTMENT  OF  LAW 


A.  C.  Burnham,  B.S.,  LL.B. 
President 

Frank  C.  Smith,  LL.B.,  Dean 

Member  New  York  Bar 

Evidence, 
Pleading, 
Practice, 
Procedure. 

R.  W.  Core,  A.B.,  LL.B. 

Member  Michigan  Bar 

Domestic  Relations. 

Contracts, 

Municipal  Corporations, 

Torts, 

International  Lazv. 

C.  H.  Sayles,  LL.B. 

Member  Michigan  Bar 

History  of  the  Law, 
Private  and  Public  Corporations, 
Equity,  Trusts 
Contracts 


Morris  M.  Ferguson,  A.B.,  LL.B. 

Member  Illinois  Bar 

Real  Property, 
Abstracts, 
Real  Estate  Lazv, 
Personal  Property. 

A.  E.  Dennis,  A.  B.,  LL.  B., 

Member  Missouri  Bar 

Guaranty  and  Suretyship, 
Constitutional  Law, 
Statutory  Law  and  Pleading. 

Charles  Coan,  LL.  B., 

Member  Colorado  Bar 

Criminal  Law, 
Negotiable  Instrufnents. 

Lucius  Randolph,  Jr.,  LL.  B., 

Member  District  of  Columbia  Bar 

Patent  Lazv, 

Trademarks  and  Copyrights. 

Frederick  M.  Hall,  LL.  B., 

Member  Massachusetts  Bar 

Mining  Law, 
Sales, 
Agency, 
Partnership. 


SPECIAL  FACULTY  FOR  CANADA 

JOHN  KING.  K.  C. 
oi  the  La'iv  Society  oi  Upper  Canada 

WARWICK  F,  CHIPMAN,  B.  C.  L. 
of  the  Law  Society  of  Quebec 

W.  H.  TRUEMAN,  LL.  B. 
of  the  Law^  Society  of  Maoitoba 


AMERICAN  EXTENSION  UNIVERSITY      . 

PRELIMINARY  STATEMENT 

The  American  Extension  University  is  chartered  under 
the  laws  of  the  State  of  CaHfornia,  as  an  educational  institu- 
tion, and  is  authorized  to  give  instruction  either  to  resident 
students,  or  by  correspondence,  and  to  confer  all  appropriate 
honors  and  degrees. 

The  Extension  Law  Department  of  the  University  gives 
a  complete  course  in  Law  by  correspondence,  leading  to  the 
degree  of  Bachelor  of  Laws, — LL,B. 

NEED  OF  THIS  COURSE.— Within  the  past  three 
years,  four  different  institutions  have  offered  such  a  course 
and  the  remarkable  combined  enrollment  of  over  30,000  stu- 
dents secured  by  them  within  eighteen  months  of  organization, 
is  sufficient  evidence  of  the  demand  for  training  by  this  method. 

The  President  of  the  American  Extension  University  was 
the  prime  mover  in  the  organization  of  two  of  these  institutions 
and  was  the  active  business  manager  of  three  of  them  during 
their  inception  and  early  development.  He  is  probably  better 
informed,  both  as  to  the  strength  and  weakness  of  the  policies 
of  these  organizations  than  any  other  living  man.  He  was  also 
for  many  years  an  exceptionally  successful  teacher  in  one  of 
America's  largest  regular  State  Universities. 

Besides  being  for  several  years  a  post-graduate  student 
of  two  of  the  largest  universities  in  this  country  and  of  Paris, 
Gottingen  and  Berlin  in  Europe,  he  has  himself  taken  four 
different  correspondence  courses  in  as  many  different  schools, 
and  is  thus  thoroughly  familiar  with  the  actual  practice  of  the 
best  of  these  institutions,  as  well  as  with  the  most  up-to-date 
and  effective  methods  yet  devised  for  correspondence  instruc- 
tion in  general 

It  is  believed  that,  in  spite  of  the  good  work  being  done  by 
the  institutions  already  in  the  field,  there  are  three  certain 
respects  in  which  all  Extension  and  Correspondence  courses, 
heretofore  offered,  fall  short.    These  deficiencies  are: 

1.  The  present  courses  are  too  expensive; 

2.  The  present  courses  are  too  detailed  and  extensive 
and  require  too  much  time  for  the  busy  man  of  today; 

3.  The  present  courses  do  not  give  enough  attention  to 
the  statutory  laws  or  codes  of  the  different  States. 


6  AMERICAN  EXTENSION  UNIVERSITY 

« 

The  American  Extension  University  Law  Course  is  less 
expensive,  occupies  one's  spare  time  for  but  two  years,  is  guar- 
anteed to  prepare  one  to  pass  the  legal  examinations  for  the  bar 
of  any  State,  and  carries  with  it  the  highest  legal  honors  given 
at  graduation  from  the  best  residence  universities, — the  degree 
of  Bachelor  of  Laws. 

This  course  is  the  only  Law  course  given  by  mail  where 
the  lessons  and  instruction  are  mailed  weekly,  and  not  de- 
livered in  bulk  for  the  full  course,  and  where  the  Faculty  keeps 
in  close  personal  touch  with  the  students  and  actually  gives 
their  work  constant  personal  supervision.  And  it  is  the  only 
one  where  the  lessons  on  Pleading  and  Practice,  and  on  the 
Statutes  and  Codes,  are  made  practical  and  take  into  account 
the  vital  differences  in  different  States. 

The  Dean  of  the  Law  Faculty  has  an  international  reputa- 
tion as  a  Law  writer  and  editor.  He  was  the  original  editor  of 
"The  American  Lawyer,"  for  twenty  years  has  been  law  editor 
of  "The  American  Banker,"  and  for  seven  years  held  also  a  like 
editorship  with  "The  Financier,"  all  of  New  York  City.  He 
instituted,  and  was  the  editor  of  the  early  volumes  of  the 
American  and  English  Railroad  Cases,  New  Series,  and  the 
American  and  English  Corporation  Cases,  New  Series,  serial 
law  works  of  recognized  authority. 

As  Secretary  some  years  ago,  of  the  Committee  on  Law 
Reporting  and  Digesting,  of  the  American  Bar  Association,  his 
investigations  and  reports  were  the  marked  features  of  the 
Committee's  work,  and  received  international  notice.  Scarcely 
less  prominent,  was  his  service,  at  about  the  same  time,  as  Sec- 
retary of  the  Committee  on  International  Arbitration,  of  the 
New  York  State  Bar  Association. 

In  practice  he  has  been  in  close  affiliation  always,  with 
banking,  corporation,  commercial  and  like  business  interests, 
and  is,  in  all  respects,  eminently  fitted  for  the  Deanship  of  our 
Law  Course,  designed  primarily  to  meet  the  needs  and  condi- 
tions of  modern  business  life,  and  the  modern  business  man. 
He  is  now  resident  in  Los  Angeles,  and  will  give  the  work  of 
our  students  his  personal  attention  and  care. 

The  Faculty  is  composed  of  strong  men — each  a  specialist 
in  the  lines  assigned  to  him,  and  each  having  practical  business 
and  professional  experience  in  addition  to  being  a  skilled 
teacher. 


DEPARTMENT  OF  LAW  7 

GUARANTEE 
The  University  gives  an  absolute  guarantee  to  fit  each 
student  to  pass  the  Bar  Examinations  of  any  State  he  may 
chose,  without  any  expense  farther  than  the  amount  for  which 
he  contracts.* 

A  PRACTICAL  COURSE 

This  course  is  short,  practical,  inexpensive  and 
GUARANTEED  to  be  Sufficient.  It,  therefore,  meets  all  the 
needs  of  any  person,  desiring  a  knowledge  of  Law  for  any 
purpose  and  who  is  unable  to  attend  a  resident  school. 

Who  Should  Study  Law. — The  study  of  the  law  particu- 
larly appeals  to  three  classes  of  men : 

1st.  Those  who  undertake  the  study  with  the  intention  of 
taking  up  the  law  as  their  life  profession; 

2nd.  Those  who  desire  a  knowledge  of  the  law  as  a  part 
of  a  liberal  education; 

3rd.    Business  men. 

To  each  of  these  three  classes  the  Extension  Law  Depart- 
ment of  the  American  Extension  University  offers  excep- 
tional advantages. 

The  law  student  receives  a  course  of  preparation  for  the 
Bar  Examination  and  for  actual  practice — -far  more  complete 
and  thorough  than  that  given  in  any  other  Correspondence  or 
Extension  law  course,  or  even  in  the  great  majority  of  the  resi- 
dent law  schools.  The  course  given  covers  all  subjects  upon 
which  examinations  are  held  in  any  State. 

The  importance  of  the  study  of  law  as  a  part  of  a  liberal 
education  is  just  beginning  to  be  appreciated.  Both  as  a  mat- 
ter of  general  culture  and  of  intellectual  development,  a  full 
course  in  law  will  be  found  of  greater  real  value  than  the 
ordinary  course  leading  to  the  A.  B.  degree  in  the  average 
American  college.  For  the  one  who  undertakes  the  study  of  law 
with  this  object  in  view,  no  course  of  study  can  surpass  the  one 
given  by  this  University. 

Only  a  few  years  ago  the  study  of  law  was  one  which  was 
supposed  to  be  reserved  for  those  who  were  fitting  themselves 
to  practice  it  as  a  profession.  Such  a  view  has  been  abandoned 
in  recent  years,  and  the  value  of  the  study  of  this  important 
science  for  everyone  is  now  recognized.  To  no  class  of  the 
community,  except  perhaps  our  legislators,  is  a  general  knowl- 

*See  note  page  26. 


8  AMERICAN  EXTENSION  UNIVERSITY 

edge  of  the  law  more  essential  than  to  the  business  mem.  The 
old  maxim  that  "an  ounce  of  prevention  is  worth  a  pound 
of  cure"  holds  better  here  than  elsewhere.  Few  business  men 
have  time  to  complete  the  regular  course  of  law  such  as  is 
presented  for  the  embryo  lawyer,  but  the  busiest  one  has  the 
time  to  take  a  more  or  less  extended  course  on  the  branches  of 
particular  interest  to  him,  which  will  be  his  constant  protector 
in  all  business  matters. 

All  the  law  which  a  business  man  needs  or  would  desire  to 
know,  is  to  be  found  in  the  Extension  Course  of  the  American 

Extension  University;  while  the  Consultation  Pririleges 
granted  to  students  cannot  fail  to  prove  of  inestimable  value  to 
any  person  actively  engaged  in  the  business  world. 

The  Dean  and  the  Faculty,  with  their  wide  experience  as 
lawyers,  law  teachers  and  law  writers,  and  with  their  deep 
knowledge  not  only  of  the  law,  but  also  of  history  and  political 
science  and  modern  business  needs  and  methods,  have  produced 
a  course  which  is  not  simply  a  mechanical  compilation  of  legal 
rules,  but  comprises  also  a  deep  and  thorough  treatment  of  the 
history,  philosophy  and  science  of  the  law,  showing  not  only 
what  the  law  is,  but  how  and  why  it  came  to  be  so.  This  secures 
to  the  student  not  merely  a  few  legal  principles  learned  by 
rote  and  easily  forgotten,  but  a  clear  insight  into  the  spirit 
and  meaning  o^^the  law,  and  lays  a  sound  foundatioa  upon 
which  to  build  the  structure  of  his  later  course. 

Requirements  for  Diploma. — All  students  who  have  suc- 
cessfully completed  the  prescribed  course  of  study,  passing  an 
examination  upon  each  subject  with  an  average  standing  of 
at  least  75  per  cent.,  and  who  have  complied  with  all  other 
requirements  of  the  University,  are  entitled  to  a  Diploma  certi- 
fying to  the  completion  of  the  regular  law  course. 

Degree  of  Bachelor  of  Laws. — The  conditions  on  which 
the  degree  of  Bachelor  of  Laws,  (LL.B.)  is  given,  are  as  fol- 
lows: The  successful  completion  of  the  course  of  instruction, 
including  all  lectures  and  selected  cases  furnished  by  the  Uni- 
versity; the  passing  of  a  satisfactory  examination  upon  the 
same;  the  passing  of  a  satisfactory  examination  upon  the  stat- 
utes of  th^  applicant's  state;  the  production  of  a  satisfactory 
thesis  of  at  least  three  thousand  words  upon  some  designated 
legal  subject,  or  the  passing  of  the  bar  examination  of  some 
State. 


DEPARTMENT  OF  LAW  9 

Examinations. — Current  examinations  are  given  at  the 
completion  of  the  prescribed  work  for  each  month.  Final  ex- 
aminations are  required  to  be  taken  before  a  proper  officer,  or 
an  authorized  representative  of  the  University.  The  examina- 
tion may  be  waived  in  cases  where  the  applicant  has  success- 
fully passed  the  bar  examination  in  some  State. 

UNIVERSITY  EXTENSION  TEACHING 

The  extension  of  college  and  university  instruction  beyond 
the  walls  of  the  class  room,  to  those  who  for  business,  financial 
or  other  reasons  are  unable  to  study  in  residence,  has  become 
the  established  policy  of  the  leading  institutions  for  higher 
education  in  this  country. 

Extension  teaching,  as  developed  in  recent  years,  is  car- 
ried on  by  three  difiFerent  methods:  First,  by  correspondence; 
second,  by  class  study,  taken  up  by  a  club  specially  organized 
for  this  purpose ;  and  third,  by  lecture  courses  of  short  periods. 
All  of  these  methods  have  been  profitably  employed  in  the  study 
of  law. 

The  first  of  these, — the  correspondence  method, — is  the  one 
most  highly  endorsed  and  most  extensively  used.  There  are 
several  reasons  for  this  and  among  others  the  following  may  be 
noted :  The  student  whose  time  for  study  is  very  limited,  or  be- 
cause his  occupation  is  irregular,  loses  no  time  traveling  back 
and  forth  to  class  or  lecture  room  in  the  performance  of  his 
school  exercises. 

The  good  results  of  studying  law  by  himself  are  marked. 
The  student  learns  how  to  find  the  law  for  himself,  and  this 
ability  to  find  the  law  is  of  as  much  advantage  as  to  know  the 
law.  The  correspondence  student  does  not  depend  so  much  on 
being  told,  for  he  has  learned  to  depend  on  himself. 

Each  receives  the  personal  attention  of  capable  teachers 
and  his  progress  is  in  no  way  influenced  by  the  progress  of  any 
other  student.  The  lessons  go  directly  to  the  home  of  the 
student  and  he  can  take  his  own  time  in  their  preparation.  He 
is  not  hurried  over  his  work  to  keep  pace  with  unusually  bright 
students  who  are  in  advance  of  him ;  nor  retarded  by  dull  stu- 
dents who  would  continually  keep  the  class  back.  What  one 
man  may  grasp  in  ten  minutes  may  require  an  hour's  careful 
thought  for  another. 


10  AMERICAN  EXTENSION  UNIVERSITY 

(Extract  from  The  American  Law  School  Review,  May- June, 

1908,  page  166.) 

THE  VALUE  OF  CORRESPONDENCE  INSTRUCTION 

IN  THE  LAW 

By  Griffith  Ogden  Ellis 

The  pioneers  in  any  movement  must  expect  doubt  and  even 
opposition,  for  there  seems  to  be  a  natural  prejudice  against 
anything  new,  especially  in  methods  of  education,  even  in  Amer- 
ica, a  country  famous  as  a  worshipper  of  the  god  of  all  things 
new.  Therefore,  those  who  started  correspondence  instruction 
and  regularly  organized  institutions  for  the  practice  of  this 
method  of  instruction  realized  that  it  would  be  hailed,  if  not 
opposed,  as  a  new  feature  in  educational  methods,  which  must 
overcome  prejudices  even  of  those  who  should  have  been  its 
friends  and  supporters.  As  the  prejudice  was  only  natural, 
however,  perhaps  no  one  has  any  right  to  find  fault  with  it.  ' 

Before  going  further,  I  want  it  understood  that  in  refer- 
ring to  resident  schools  in  this  article  in  no  case  do  I  do  so  in 
the  spirit  of  criticism,  or  even  of  invidious  comparison.  In 
measuring  the  value  of  anything,  we  must  have  some  standard 
from  which  to  measure,  and  I  regard  and  here  use  the  resident 
schools  simply  as  the  gold  standard  in  methods  of  legal  educa- 
tion. 

In  this  article  I  hold  no  brief  for  any  particular  correspon- 
dence school.  I  speak  simply  on  behalf  of  the  correspondence 
system  of  instruction  itself.  In  spite  of  opposition  and  preju- 
dice, it  has  gone  steadily  on  advancing  in  popular  esteem  since 
the  first  Correspondence  School  of  Law  was  founded,  eighteen 
years  ago.  It  is  true  that  this  movement,  like  all  new  move- 
ments and  all  reforms,  has  to  a  certain  extent  suffered  by  reason 
of  its  devotees  as  well  as  at  the  hands  of  its  opponents.  Any 
sincere  and  conscientious  advocate  of  the  correspondence 
method  must  admit  that  it  has  its  weak  points  and  its  defects; 
but  the  same  thing  might  with  all  propriety  be  admitted  for  the 
resident  law  schools — in  all  justice  must  be  so  admitted.  Cer- 
tainly no  one  would  claim  that  correspondence  law  schools  are 
better  than  the  best  resident  schools,  for  that  would  be  not  only 
untrue,  but  foolish.  However,  admitting  the  weaknesses,  or 
defects,  or  deficiencies,  properly  attributable  to  it,  the  correspon- 
dence method  of  instruction  has  features  of  immense  value  to 


DEPARTMENT  OF  LAW  11 

the  public  at  large,  and  institutions  giving  correspondence  in- 
struction have  their  place — not  as  rivals  of  the  resident  schools 
and  universities,  not  necessarily  as  institutions  in  the  same  class, 
but  as  institutions  that  serve  that  greater  body  of  earnest  and 
ambitious  men  and  women  who  want  to  learn,  who  want  to 
educate  themselves,  who  want  to  improve  their  condition  and 
prospects  in  life,  but  whose  circumstances  do  not  permit  them 
to  attend  a  resident  school.  As  a  matter  of  fact,  I  am  sure  that 
our  own  school  has  created  for  the  resident  law  colleges  vastly 
more  students  than  it  has  taken  away  from  them,  and  the  same 
is  true  of  all  other  good  law  correspondence  schools. 

We  have  many  students  who  take  up  the  study  of  law  with 
no  idea  of  practicing  it  as  a  profession,  but  who  have  an  idea 
that  they  would  like  to  study  law  and  improve  their  minds  and 
add  to  their  education,  and  which  study  they  can  pursue  in  no 
other  way  than  through  a  correspondence  school.  They  become 
interested  in  the  study  of  law,  and  some  wish  to  go  to  a  resident 
school,  and  circumstances  often  so  change  that  these  students 
can  and  do  take  advantage  of  the  opportunity.  A  correspon- 
dence law  school  that  is  conscientiously  and  sincerely  conducted 
will  always  recommend  that  its  students  go  to  resident  schools 
if  they  can;  for  it  must  be  recognized  that  the  resident  law 
schools  offer  many  advantages  that  correspondence  schools 
cannot  give.  The  atmosphere  of  the  classroom,  the  association 
with  students  pursuing  the  same  line  of  work,  and  to  a  more  or 
less  extent  with  the  professors  also,  has  a  tendency  to  produce 
the  best  results  in  an  earnest  student  in  a  resident  school.  On 
the  other  hand,  so  far  as  mere  thoroughness  is  concerned,  a 
correspondence  school  need  yield  nothing  to  the  resident  school, 
provided  the  school  is  earnestly  and  sincerely  conducted,  and 
the  student  himself  earnestly  and  sincerely  desires  to  learn  and 
will  do  his  part  as  a  student.  This  is  proved  by  the  results 
attained  by  the  graduates  of  correspondence  schools  at  State 
Bar  Examinations,  and,  for  that  matter,  in  the  practice  of  the 
profession.  That  fact,  however,  is  quite  as  much  a  tribute  to 
the  student  as  to  the  correspondence  school,  if  not  more  so ;  for 
no  man  can  go  through  a  correspondence  course  unless  he 
earnestly  desires  to  learn,  and  when  he  does  go  through  such 
a  course,  and  completes  it,  it  is  certain  that  he  has  learned  at 
least  as  large  a  percentage  of  the  subjects  covered  as  has  the 
average  graduate  of  the  resident  law  school  pursuing  the  same 
course.    The  resident  schools,  of  course,  offer  the  fullest  oppor- 


12  AMERICAN  EXTENSION  UNIVERSITY 

tunities  for  learning,  if  the  student  attending  will  do  his  part 
in  them.  As  an  instructor,  I  think  I  may  claim  the  correspon- 
dence school  can  offer  equal  advantages,  though  in  making  that 
statement  I  admit  I  hold  some  mental  reservations,  and  in  no 
statement  in  this  article  do  I  speak  merely  from  theory,  because 
I  have  had  experience  as  a  student  in  two  of  the  best  university 
law  schools,  and  also  fifteen  years'  experience  in  correspondence 
instruction  since  admission  to  the  bar.  I  repeat,  therefore,  that 
while  the  correspondence  school  should  not  and  does  not  seek 
to  take  the  place  of  the  resident  school,  it  has  an  important  place 
all  its  own.  It  should  not  be  regarded  by  the  resident  law  schools 
as  a  rival,  nor  should  it  be  opposed  by  them.  They  should  en- 
courage it,  if  their  faculties  are,  in  the  broadest  sense,  public 
educators,  instead  of  simply  ambitious  advocates  of  their  own 
institution  and  of  their  own  method.  Knowing  all  of  the  ad- 
vantages and  values  of  the  resident  school,  having  seen  them 
and  participated  in  them  as  a  student,  and  knowing  the  advaa- 
tages  and  values  on  the  one  hand,  and,  on  the  other  the  weak- 
ness and  deficiencies  of  the  correspondence  school ;  having  seen 
them  and  taken  part  in  them  as  an  instructor,  I  think  I  may 
claim  for  the  correspondence  school,  in  the  field  that  it  seeks  to 
occupy  and  does  occupy,  a  position  of  the  very  highest  service 
and  value  to  the  public.  For  our  own  school,  as  an  institution, 
Task  neither  consideration  nor  favors,  for  as  an  educational 
factor  I  am  acquainted  with  the  results  of  its  work  and  know 
it  to  be  entitled  to  the  highest  consideration  on  behalf  of  its 
students  and  in  their  interests,  and  I  am  sure  the  same  may  be 
said  of  several  other  correspondence  institutions. 

The  main  point  is  that  the  Correspondence  Schools  of  Law 
have  their  place,  and  were  in  fact  brought  into  existence  by 
the  necessities  of  a  large  body  of  students,  who  were,  in  the 
nature  of  things,  entitled  to  as  much  in  the  way  of  opportunities 
as  any  one  else,  but  to  whom  circumstances  closed  the  doors  of 
the  resident  schools  and  universities.  The  correspondence 
method  of  instruction,  therefore,  has  its  place,  and  during  the 
last  eighteen  years  it  has  conclusively  proved  its  value  to  the 
public.  So  far  as  individual  schools  are  concerned,  I  speak  not 
for  them — neither  for  the  one  with  which  I  am  connected,  nor 
any  other.  I  recognize  the  method,  however,  give  it  the  credit 
that  is  due  it,  and  let  the  individual  schools  stand  or  fall  by 
their  own  merits.  With  all  institutions  it  should  be,  and  ulti- 
mately is,  simply  a  case  of  the  survival  of  the  fittest. 


DEPARTMENT  OF  LAW  13 

The  students  whom  the  correspondence  schools  serve  are, 
in  the  vast  majority,  not  very  young  men,  but  men  who  have 
been  out  in  the  world  long  enough  to  have  realized  from  their 
business  experience  the  value,  yea,  the  necessity,  of  education, 
and  by  those  experiences  to  develop  ambitions,  many  of  them  for 
the  practice  of  law,  but  ambitions  which  the  circumstances  in 
which  they  are  placed  make  it  impossible  for  them  to  gratify 
through  the  means  offered  by  resident  schools.  Either  for 
family  or  other  reasons,  they  cannot  afford  to  give  up  their 
businesses  or  their  incomes  to  attend  a  resident  school.  They 
must,  therefore,  either  give  up  their  ambitions  or  study  by 
some  other  method.  For  them,  at  least,  the  correspondence 
school  offers  the  best  opportunity  that  is  obtainable.  It  offers 
them  substantially  the  same  course  as  does  the  resident  school. 
It  may  not  offer  them  all  the  benefits  or  opportunities  or  advan- 
tages that  the  resident  school  does,  but  it  at  least  offers  them  the 
opportunity  to  receive  the  same  information  that  they  would 
get  in  a  resident  school,  and  to  obtain  it  according  to  their  own 
time  and  opportunity  for  study,  and  by  a  method  which,  if  con- 
scientiously practiced  by  the  school  and  earnestly  carried  out 
by  the  student,  is,  for  the  purposes  of  thoroughness,  nearly 
ideal.  In  this  connection  the  following  letter  written  by  one 
student,  Rev.  Harry  White,  of  Natick,  Mass.,  a  graduate  of 
Harvard  and  a  man  whose  education  and  experience  are  such 
as  to  qualify  him  to  form  a  correct  judgment,  may  be  of  interest. 
It  is  about  as  clear  a  statement  of  the  merits  of  the  correspond- 
ence method  as  could  be  offered,  and  is  certainly  a  high  com- 
mendation of  the  work  being  done  by  the  school  in  which  he 
was  enrolled  as  a  student. 

"Dear  Sirs:  Being  a  graduate  of  Harvard,  I  shared  in  the  prejudice  which 
many  college  men  have  against  the  correspondence  schools;  and,  desiring  some 
knowledge  of  the  law,  I  took  the  work  up  with  you  with  considerable  mis- 
giving. I  am  glad  to  be  able  to  say  I  have  been  most  agreeably  surprised  by 
the  character  of  the  work  done  in  Correspondence  Schools  of  Law. 

"In  comparing  correspondence  schools  with  resident  schools  and  colleges, 
we  are  constantly  unfair  to  the  former  on  account  of  the  prestige  which  is 
enjoyed  by  the  latter.  Any  man  looking  back  at  the  facts  of  his  university  days 
will  see  that,  although  a  great  many  scholars  were  on  the  teaching  force,  it  was 
exceptional  that  the  great  scholar  was  also  the  great  teacher.  While  there  are 
some  obvious  advantages  in  favor  of  the  resident  study  at  a  university,  there 
are  also  some  decided  advantages  in  favor  of  the  correspondence  school.  Take 
the  facts  about  lectures.  If  the  student  listens  attentively  to  the  lectures  with- 
out taking  notes,  he  soon  forgets  them.  If  he  takes  notes,  his  attention  is 
divided,  and  he  misses  a  part  of  the  lecture.  If  the  instructor  happens  to  be 
dull  and  prosy,  the  student  is  at  a  still  greater  disadvantage.  If  the  air  is  bad, 
or  he  chances  to  feel  tired  or  ill  at  the  time  of  the  lecture,  he  misses  still  more 
of  its  substance.  With  the  correspondence  school,  the  student  does  not  labor 
under  these  disadvantages.     The  instruction  being  printed  or  written,  the  stu- 


14         AMERICAN  EXTENSION  UNIVERSITY 

dent  is  able  to  get  everything.  If  he  does  not  understand,  he  can  read  it  oyer 
again.  If  he  is  still  unable  to  understand,  he  can  have  it  explained  for  him, 
without  making  himself  conspicuous,  or  annoying  the  lecturer  by  an  interrup- 
tion. He  is  able  to  control  his  own  rate  of  progress  and  to  go  as  rapidly  or  as 
slowly  as  he  chooses.  He  is  not  hampered  by  the  dull  students  nor  hurried 
by  the  bright  ones. 

"Your  lesson  papers  seem  to  be  constructed  on  the  soundest  pedagogical 
basis.  There  is  the  supplementary  matter  which  illustrates  or  explains  the 
matter  of  the  text-book  and  the  questions  by  which  the  student  may  test  his 
knowledge  of  the  text. 

"Your  lectures  cover  the  subject  in  a  way  which  enables  the  student  to 
grasp  the  subject  he  is  studying  as  a  whole,  into  which  he  can  fit  the  different 
subordinate  principles,  so  that  it  all  lies  in  his  mind  as  a  systematized  unit, 
rather  than  a  mass  of  separate  and  unrelated  facts  and  details  which  must  be 
retained  by  sheer  force  of  memory. 

"But,  however,  much  praise  may  be  due  to  the  lesson  papers  and  lectures,  I 
think  that  the  most  effective  part  of  your  instruction  is  that  in  the  Test 
Questions  and  Practice  Department.  It  is  everybody's  experience  that  we 
learn  best  by  doing  things.  We  learn  to  walk  by  putting  the  principles  of 
walking  into  practice,  and  we  learn  to  swim  in  the  same  fashion,  and  the 
student  of  law  learns  law  best  by  putting  the  legal  principles,  as  he  studies 
them,  into  practice,  by  working  out  just  such  Test  Questions  as  yom  furnish 
him,  and  by  doing  such  work  as  is  prescribed  in  the  Practice  Department.  He  will 
make  mistakes,  of  course,  but  there  is  just  as  much  learned — if  not,  indeed, 
more —  in  making  mistakes  and  being  corrected,  as  there  is  in  not  making 
mistakes. 

"If  you  will  pardon  this  somewhat  lengthy  letter  (which  you  may  print,  if 
you  care  to,  for  this  work  seems  to  me  to  be  so  desirable,  not  only  to  a  man 
who  desires  to  be  a  lawyer,  but  to  every  man  who  is  a  citizen,  that  I  should 
like  to  have  it  taken  up  more  universally),  I  should  say  that  your  catalogue 
does  not  fairly  or  adequately  represent  the  merits  of  your  work.  Your  school 
does  suffer  from  two  limitations,  it  is  true.  It  cannot  supply  a  student  with 
brains  and  it  cannot  make  him  work.  But,  if  he  has  the  average  amount  of 
intelligence  and  the  average  capacity  for  work,  he  can  learn  law  with  your 
system  of  instruction.  He  can  learn  law  thoroughly,  and  with  a  great  deal 
of  pleasure  in  the  learning." 

One  of  our  students,  a  university  graduate,  who  was  finally 
able  to  return  to  the  law  school  of  his  own  university  and  grad- 
uate therefrom,  wrote  us: 

"In  some  respects  I  think  your  method  is  superior  to  university  class- 
room work  for  man  preparing  for  the  bar  examination." 

Both  these  men  are  qualified  to  form  opinions  that  are  en- 
titled to  consideration,  for  they  are  men  of  high  education, 
having  had  considerable  experience  with  both  methods  of  study. 

OPINION  OF  THE  LATE  WM.  R.  HARPER, 

PRESIDENT  OF  CHICAGO  UNIVERSITY 

Along  the  same  line,  the  late  Dr.  William  R.  Harper,  while 
President  of  the  Chicago  University,  a  short  time  before  his 
death,  in  a  public  address  said : 

"In  some  respects  there  is  opportunity  for  better  work  in  correspondence 
study  than  in  the  ordinary  class-room  recitation.  Each  student  in  a  corres- 
pondence course  has  to  recite  on  all  the  lessons,  while  in  many  a  class-room 
the  student  recites  on  only  about  one-thirtieth  of  the  work  of  a  three  months' 


DEPARTMENT  OF  LAW  15 

course.  It  is  safe  to  say  that  the  standard  of  work  done  in  correspondence 
courses  is  fully  equal  to  that  of  the  work  done  in  the  large  class.  Indeed,  I  may 
say  that  there  is  a  larger  proportion  of  high-grade  work  done  by  correspond- 
ence than  in  class  recitation.  People  who  take  work  by  correspondence  do  it 
because  they  want  to  get  something  out  of  it,  while  in  many  courses  in  colleges 
the  students  take  the  work  because  it  is  required  in  the  curriculum." 

Further,  drawing  his  illustrations  from  the  teaching  by 
correspondence  in  Hebrew  and  other  dead  languages,  President 
Harper  said : 

"The  work  done  by  correspondence  is  even  better  than  that  done  in  the 
class-room.  The  correspondence  student  does  all  the  work  himself.  He  does 
twenty  times  as  much  reciting  as  he  would  in  a  class  where  there  were  twenty 
people.     He  works  out  the  difficulties  himself  and  the  results  stay  with  him." 

In  another  address  Dr.  Harper  is  said  to  have  stated  that 
the  students  who  took  the  freshman  and  sophomore  work  of 
his  university  by  correspondence  and  came  to  Chicago  to  enter 
the  junior  class,  were  more  thoroughly  prepared  than  were 
those  who  took  the  freshman  and  sophomore  work  in  resident 
attendance.  Whether  the  foregoing  statement  is  absolutely 
correct  I  cannot  say;  but  I  can  very  well  believe,  from  my  ex- 
perience, that  the  statement  in  the  form  given  is  absolutely  true. 

CORRESPONDENCE  SCHOOL  STUDENTS  EXCEL  IN 

BAR  EXAMINATIONS 

Admitting  that  the  correspondence  method  of  instruction 
is  good  in  some  ways,  the  question  may  be  raised :  Can  the  law 
be  successfully  taught  by  correspondence  ?  Seventeen  or  eigh- 
teen years  ago  the  asking  of  such  a  question  might  have  been 
justified.  Today,  however,  that  is  not  the  case,  for  the  reason 
that  the  experience  of  the  various  Correspondence  Law  Schools 
and  of  thousands  of  students  who  have  studied  in  these  schools 
has  conclusively  proved  that  the  law  can  be  successfully  taught 
by  correspondence,  as  is  proved  by  the  fact  that  those  same 
students  have  taken  the  State  Bar  Examinations  and  have  suc- 
ceeded— passing  them  almost  without  exception.  After  all  is 
said  and  done,  it  is  results  that  count.  It  was  stated  in  a  maga- 
zine article  some  time  ago  that  25  per  cent  of  the  graduates  of 
the  resident  law  schools  fail  on  the  bar  examinations,  and  that 
60  per  cent  of  the  law  office  students  fail  on  bar  examinations. 
The  records  of  the  leading  Correspondence  Law  Schools  show 
that  less  than  1  per  cent  of  the  graduates  of  these  schools  who 
take  the  bar  examinations  fail  to  pass.  While  I  do  not  mean 
to  claim  by  this  statement  any  superiority  for  the  Correspon- 
dence Law  Schools  over  the  resident  schools,  for  in  both  cases 


16         AMERICAN  EXTENSION  UNIVERSITY 

the  result  depends  largely  on  the  student,  the  above  record  is 
at  least  a  high  tribute  to  the  students  of  the  correspondence 
schools,  to  their  earnestness,  their  persistence,  and  their  ability, 
and  it  proves  conclusively  that  a  man  can  learn  the  law  by  cor- 
respondence and  that  he  can  learn  it  thoroughly  and  well. 

As  has  been  stated,  a  man  cannot  go  through  a  correspon- 
dence course  in  law  except  he  wants  to  learn.  Study  by  corres- 
pondence is  harder  than  at  the  resident  schools,  for  it  has  none 
of  the  adventitious  attractions  that  university  life  offers,  and 
no  one  takes  a  correspondence  course  merely  because  father 
can  afford  it  and  it  is  a  nice  way  to  spend  a  few  years,  which  is 
the  spirit  with  which  so  many  boys  go  to  college. 

Results  are  what  should  be  sought,  and  that,  if  a  man  has 
learned  the  law  and  knows  it,  he  is  entitled  to  the  fullest  con- 
sideration, opportunity,  and  respect,  and  that  neither  courts  nor 
schools  should  throw  in  his  way  rules  or  requirements  or  ob- 
stacles that  can  be  overcome  only  by  circumstances  and  oppor- 
tunities, and  against  which  brains  and  knowledge  alone  are  of 
no  avail.  The  question,  it  seems  to  me,  therefore,  should  be, 
in  all  bar  examinations  and  in  all  tests :  What  and  how  much 
do  you  know  ?  not  in  any  sense,  where  or  how  did  you  learn  it  ? 

(From  Blackst one's  Commentaries,  1  Black.  5.) 
WHAT  BLACKSTONE  SAYS  ABOUT  A  KNOWLEDGE 

OF  LAW 

For  I  think  it  is  an  undeniable  position,  that  a  competent 
knowledge  of  the  laws  of  that  society  in  which  we  live,  is  the 
proper  accomplishment  of  every  gentleman  and  scholar,  an 
highly  useful — I  had  almost  said  essential  part  of  liberal  and 
polite  education.  And  in  this  I  am  warranted  by  the  example  of 
ancient  Rome,  where,  as  Cicero  informs  us,  the  very  boys  were 
obliged  to  learn  the  twelve  tables  by  heart,  as  a  carmen  neces- 
sarium  or  indispensable  lesson,  to  imprint  on  their  tender  minds 
an  early  knowledge  of  the  laws  and  constitution  of  their  coun- 
try. 

And,  first  to  demonstrate  the  utility  of  some  acquaintance 
with  the  laws  of  the  land,  let  us  only  reflect  a  moment  on  the 
singular  frame  and  polity  of  that  land  which  is  governed  by 
this  system  of  laws.  A  land,  perhaps,  the  only  one  in  the 
universe,  in  which  political  or  civil  liberty  is  the  very  end  and 
scope  of  the  constitution.    This  liberty,  rightly  understood,  con- 


DEPARTMENT  OF  LAW  17 

sists  in  the  power  of  doing  whatever  the  laws  permit,  which  is 
only  to  be  effected  by  a  general  conformity  of  all  orders  and 
degrees  to  those  equitable  rules  of  action  by  which  the  meanest 
individual  is  protected  from  the  insults  and  oppression  of  the 
greatest.  As  therefore  every  subject  is  interested  in  the  preser- 
vation of  the  laws,  it  is  incumbent  upon  every  man  to  be 
acquainted  with  those  at  least  with  which  he  is  immediately 
concerned,  lest  he  incur  the  censure  as  well  as  inconvenience  of 
living  in  society  without  knowing  the  obligation  which  it  lays 
him  under.  And  this  much  may  suffice  for  persons  of  inferior 
condition  who  have  neither  time  nor  capacity  to  enlarge  their 
views  beyond  that  contracted  sphere  in  which  they  are  appointed 
to  move.  But  those  on  whom  nature  and  fortune  have  bestowed 
more  abilities  and  greater  leisure  cannot  be  so  easily  excused. 
These  advantages  are  given  them  not  for  the  benefit  of  them- 
selves only,  but  also  of  the  public;  and  yet  they  cannot,  in  any 
scene  of  life  discharge  properly  their  duty  either  to  public  or 
themselves  without  some  degree  of  knowledge  in  the  laws. 

But  to  proceed  from  private  concerns  to  those  of  a  more 
public  consideration.  All  gentlemen  of  fortune  are,  in  conse- 
quence of  their  property,  liable  to  be  called  upon  to  establish  the 
rights,  to  estimate  the  injuries,  to  weigh  the  accusations  and 
sometimes  to  dispose  of  the  lives  of  their  fellow-subjects  by 
serving  upon  juries.  In  this  situation  they  have  frequently  a 
right  to  decide,  and  that  upon  their  oaths,  questions  of  nice  im- 
portance, in  the  solution  of  which  some  legal  skill  is  requisite, 
especially  where  the  law  and  the  fact,  as  it  often  happens,  are 
intimately  blended  together.  And  the  general  incapacity  even 
of  our  best  juries  to  do  this  with  any  tolerable  propriety  has 
greatly  debased  their  authority  and  has  unavoidably  thrown 
more  power  in  the  hands  of  judges  to  direct,  control  and  even 
reverse  verdicts  than  perhaps  the  constitution  intended. 

(The  Saturday  Evening  Post,  July  25,  1908.) 

BOUND  FOR  THE  TOP 

In  the  nature  of  every  civilized  man  there  is  an  instinct  of 
progressiveness — a  desire  to  excel  in  some  particular.  It  is 
found,  in  some  degree,  in  the  most  inefficient  as  well  as  the  most 
energetic  of  men.  If  the  opportunity  for  its  outlet  does  not 
occur  in  his  work,  it  will  display  itself  in  his  recreation — even 
in  his  dissipation.     It  appears  in  the  ditch-digger  and  in  the 


18         AMERICAN  EXTENSION  UNIVERSITY 

accountant,  in  the  mill  operative  and  in  the  skilled  mechanic. 
It  may  exhibit  itself  in  the  breeding  of  a  few  hens,  the  improve- 
ment of  a  bull  terrier's  progeny,  or  in  the  raising  of  the  earliest 
peas,  or  the  biggest  squash  in  a  suburban  lot.  It  may  turn  to 
the  building  of  a  motor  boat  or  sail  boat ;  to  experimental  recrea- 
tions in  mechanical,  electrical  or  chemical  affairs;  to  studies 
in  literature  or  art.  All  these  may  be  recreations  and  relaxations 
entirely  foreign  to  the  man's  daily  occupation,  and  yet  it  is 
quite  possible  to  find  in  them  the  fighting  chance  for  greatly 
improved  conditions. 

Van  Depoele,  a  cabinet  maker  of  Detroit,  Michigan,  took 
up  the  study  of  electricity  for  evening  amusement,  and  he  be- 
came the  inventor  of  the  overhead  trolley  system  and  a  highly 
successful  constructer  of  electric  street  railways.  One  of  the 
largest  truck  farmers  of  Marblehead,  Mass.,  developed  from 
a  dry  goods  clerk  who  used  to  cultivate  a  few  vegetables  in  a 
small  suburban  lot. 

Corliss,  the  inventor  of  the  noted  cut-off  valve  system  for 
steam  engines,  made  his  experiments  after  working  twelve 
hours  a  day  as  a  meat-cutter.  Nathaniel  Hawthorne  attained 
his  splendid  height  in  literature  while  working  in  the  custom 
house. 

Turner,  one  of  the  greatest  of  English  painters,  gained 
some  measure  of  renown  while  earning  his  living  as  a  barber. 

William  Herschel,  afterward  knighted  for  his  attainments 
as  an  astronomer,  built  his  famous  instruments  and  astounded 
the  scientists  of  the  day  by  his  discoveries  while  earning  his 
living  as  a  violinist  at  concerts  and  dances. 

The  whole  point  is  that,  while  the  chance  of  promotion  for 
the  mechanic,  the  clerk,  the  employe  of  any  sort,  may  occur  at 
any  moment  and  should  find  him  ready,  other  chances  may,  and 
frequently  do,  occur  outside  of  any  actual  advancement  in  his 
particular  occupation.  But  it  is  absolutely  certain  that  unless 
he  is  ready  for  them,  they  will,  in  either  case,  mean  nothing  to 
him,  nor  will  he  often  see  them.  If  he  has  not  a  few  dollars 
ahead  the  better  job,  a  hundred  miles  away,  or  the  good  bargain 
in  a  little  real  estate,  or  the  chance  to  develop  some  bright  little 
business  idea,  appeals  in  vain.  If  he  has  not  acquired  sound 
confidence  in  himself  and  some  assertiveness  of  his  own  knowl- 
edge, he  will  not  be  called  upon  to  take  charge  when  his  chief  or 
foreman  is  away  sick  or  on  a  vacation.  If  he  permits  his  recrea- 
tions to  absorb  his  energies  in  matters  which  return  him  nothing 


DEPARTMENT  OF  LAW  19 

— either  in  useful  knowledge  or  good  hard  dollars,  he  may 
easily  reach  middle  age  with  a  reputation  as  a  "rattling  good 
fellow"  but  without  the  power  to  raise  a  hundred  dollars  for 
the  most  urgent  necessity  or  the  most  promising  of  chances. 

This  getting  ready  and. keeping  ready  gives  a  man  strength, 
self-confidence  and  a  cheery  outlook.  It  easily  lifts  him  out  of 
the  waiting  class  because  he  feels  that  he  is  not  bound  to  his 
job ;  that,  although  favor  or  preferment  is  a  mighty  good  thing, 
if  it  comes  his  way,  he  is  not  dependent  upon  any  one  man  or 
firm  for  his  fighting  chance. 

(Extract  from  Chicago  daily  papers.) 

MORE  NEED  OF  TRAINING 

The  necessity  for  thorough  preliminary  training  for  success 
in  the  modern  business  world  was  emphasized  by  the  Rev. 
Alexander  J.  Burrowes,  President  of  St.  Ignatius  College,  in 
an  address  last  night  to  the  graduates  of  the  commercial  course 
of  St.  Ignatius  High  School. 

"There  has  been  a  great  change  in  the  business  world  of 
recent  years,"  he  said.  "As  much  brains,  as  much  special  train- 
ing, is  demanded  of  the  business  man  today  as  of  the  professional 
man.  The  modern  business  man  does  not  confine  his  activities 
to  sitting  behind  a  counter  and  waiting  for  people  to  sell  goods 
to  him  and  buy  them  from  him.  He  is  active  and  aggressive 
and  he  creates  and  meets  great  problems  which  demand  wide 
knowledge  and  a  trained  mind. 

"I  believe  the  numerous  cases  of  breakdown  by  business 
men  under  the  strain  of  modern  life  is  due  to  their  insufficient 
mental  foundation.  Their  minds  are  not  fitted  to  carry  the 
strain  put  upon  them  by  the  complexity  of  modern  industrial 
life." 

(Extract  from  The  Saturday  Evening  Post,  June  13,  1908.) 

THOMAS  F.  RYAN,  HIS  PERSONALITY  AND 

POINT  OF  VIEW 

By  Isaac  F.  Maxosson. 

Yet  when  I  asked  him  if  he  had  ever  laid  down  any  definite 
business  rule  to  follow,  he  said: 

"No,  I  never  have  followed  any  rule.  I've  simply  worked 
hard  and  kept  at  it.    My  experience  has  led  me  to  believe  that 


20         AMERICAN  EXTENSION  UNIVERSITY 

in  this  country  men  are  judged  not  so  much  by  what  they  are  as 
by  what  they  do.  Therefore,  satisfaction  comes  from  doing 
things. 

"I  have  always  found  it  a  good  plan,  however,  to  master  the 
details  of  an  enterprise  before  moving.  I  like  to  take  hold  and 
build  up.  It  is  good  to  lead  forlorn  hopes.  But  when  I  have 
finished  a  work  it  ceases  to  have  interest  for  me.  I  prefer  to 
look  forward  rather  than  backward;  I'd  rather  speak  of  what 
I  have  accomplished  than  discuss  what  I  am  going  to  do." 

I  asked  him  to  indicate  the  qualities  which  in  his  opinion 
most  make  for  a  young  man's  success  these  days.  Mr.  Ryan 
said :    'Industry,  sobriety  and  concentration." 

And  right  here  may  be  repeated  a  little  incident  which 
throws  light  on  Mr.  Ryan's  methods.  He  is  a  director  in  many 
corporations,  and  is  the  type  of  director  who  directs.  As  a  re- 
sult, he  has  often  surprised  lawyers  with  his  knowledge  of  law. 
Several  years  ago  one  of  his  sons  found  a  worn  set  of  Chitty's 
Blackstone  in  the  attic.  Taking  it  downstairs,  he  said :  "Father, 
whose  books  are  these  ?" 

Mr.  Ryan  picked  them  up  fondly,  and  said:  "I  bought 
those  books  when  I  was  starting  out  in  business  as  a  boy.  I 
thought  that,  in  order  to  succeed,  I'd  have  to  know  law,  so  I 
studied  Blackstone  at  night." 

LAW  IN  GOVERNMENT  SERVICE 

One  of  the  most  encouraging  features  with  respect  to  legal 
education  in  the  District  of  Columbia,  is  the  remarkable  change 
in  the  sentiment  which  existed  some  years  ago  among  the  gov- 
ernment officials  with  regard  to  the  desirability  of  having  the 
civil  employes  of  the  government  take  up  the  study  of  law  while 
in  the  government  service.  There  has  been  a  change  of  front 
in  this  particular,  and  the  recognition  which  is  being  given  in 
the  government  departments  to  those  who  hold  degrees  in  law 
has  had  a  very  marked  efifect  upon  the  increased  registration 
of  the  law  schools  in  Washington. — Exchange. 

(Reprinted  from  Chicago  Tribune,  August  16,  1908.) 

From  sketch  of  Frank  H.  Hitchcock,  chairman  Republican 
National  Committee. 

STUDIED  LAW  IN  EVENING 

"My  new  work  satisfied  me,  and  so  did  my  surroundings.    I 


DEPARTMENT  OF  LAW  21 

made  the  acquaintance  of  Mr.  Justice  Harlan  of  the  Supreme 
Court,  told  him  what  I  meant  to  do,  and  he  invited  me  to  attend 
one  of  his  lectures  on  constitutional  law  at  George  Washington 
University.  I  heard  him  and  that  led  me  to  study  law,  going 
to  classes  in  the  evening  and  paying  my  own  way  as  I  went 
along." 

(Extract  from  Law  Magazine.) 

LAW  IN  BUSINESS  AFFAIRS 

The  advantage  of  an  education  in  law  is  apparent  to  anyone 
who  has  observed  the  management  and  guidance  of  the  largest 
enterprises  in  the  country.  Inspection  of  the  directorates  of 
large  corporations  shows  one  or  more  men  well  skilled  in  the 
law,  in  their  membership.  These  men  determine  and  direct 
the  business  affairs  of  the  corporations,  and  avoid  the  dangers 
and  expenses  of  much  litigation. 

This  is  specially  noticeable  in  the  case  of  the  United  States 
Steel  Corporation,  which  is  possibly  the  largest  private  corpora- 
tion in  the  United  States.  The  Chairman  of  the  Board  of 
Directors  of  that  company,  Hon.  E.  H.  Gary,  distinguished  as 
a  lawyer  and  a  jurist,  has  managed  its  affairs  with  less  friction 
to  the  Government,  the  State,  the  public  and  its  employes,  than 
any  other  corporation  approaching  it  in  magnitude,  in  the 
United  States.  Judge  Gary,  being  a  lawyer,  appreciated  the 
advantages  of  his  company  doing  business  along  legal  lines,  and 
it  is  not  only  one  of  the  best  managed  corporations,  but  one  of 
the  most  profitable. 

What  is  good  in  principle  for  this  concern,  should  apply  to 
others.  Every  business  man  should  acquaint  himself  along 
these  lines,  that  he  may  conduct  his  business  without  friction, 
avoid  the  expense  of  litigation,  and  devote  all  of  his  energies  to 
production  and  distribution. 

(From  The  Prudential.) 

Foresight  is  where  we  are  able  to  blunder  into  success  with- 
out looking  surprised. — Puck. 

But,  pray,  Mr.  Puck,  when  do  we  ever  "blunder  into  suc- 
cess", Never!  The  thing  is  impossible.  There  can  be  no 
success  unless  one  works  for  it.  Did  Napoleon  "blunder  into 
success"  ?  Did  Washington  or  Franklin  or  Jefferson  or  Jackson 
or  Lincoln  or  Grant  or  any  one  else  of  our  highly  successful 


■f%, 


22  AMERICAN  EXTENSION  UNIVERSITY 

Americans  in  the  arts  of  war  or  peace  ''blunder  into  success"? 
No,  no ;  every  one  of  them  achieved  success  by  assiduous  devo- 
tion to  the  genius  of  hard  work.  So  it  was  with  our  own  great 
Prudential.  Here  there  was  no  blundering,  no  tumbling  into 
good  fortune.  Success  came — wonderful,  marvelous,  unparal- 
lelled  success — because  the  price  demanded  was  paid;  hard, 
everlasting  work. 

And  so  it  is  with  every  successful  man  in  our  service.  In 
no  case  did  he  ever  "blunder  into  success."  In  every  case,  from 
the  year  1875  to  this  year  of  most  glorious  prospects  and  oppor- 
tunities, this  year  of  grace,  1909,  the  men  who  have  succeeded 
have  won  their  successes  by  getting  "on  the  job"  from  the  start 
and  working  it  for  all  it  was  worth  to  them  and  to  the  company. 

No,  siree;  you  cannot  "blunder  into  success."  You  can 
blunder  into  failure  all  right  and  easy,  but  into  success — Never ! 

Note. — In  order  to  avail  oneself  of  the  Guarantee  mentioned  on  page  7, 
it  is  necessary  that  the  student  complete  the  regular  Course  in  the  prescribed 
two  year  term  and  take  the  bar  examination  at  the  first  regular  examinati6n 
after  completing  the  Course,  or  after  the  expiration  of  the  term  of  study  re- 
quired by  the  statutes  of  the  state  chosen,  in  case  such  state  has  a  statute 
requirement  as  to  term  of  study. 


AMERICAN  EXTENSION  UNIVERSITY 

(non-resident  instruction.) 

Chartered  Under  the  Laws  of  California 

LOS  ANGELES 


A.   C.  BURNHAM,  B.  S.  LL.  B..  Prcident 


DEPARTMENT  OF  LAW 

FRANK  C.  SMITH,  LL.  B..  Dean 


LESSON  L— 

Title  I. — Legal  Outlines. 
Title  IL — History  of  the  Law, 

By  C.  H.  Sayles,  LL.B. 


Copyright,  1910  by 

The  Brodie  Burnham  Co. 

Los  Angeles 


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EXTENSION  LAW  COURSE 

Lesson  I — Contents. 

TITLE  I.— Legal  Outlines. 

Chapter  I.    — Elementary  Principles. 
Chapter  11.  — Classification  of  the  Law. 
Chapter  III. — Where  to  Find  the  Law. 

TITLE  II. — History  of  the  Law. 
Chapter  I.    — Origin  of  the  Law. 
Chapter  II.  — Babylonian  Law. 
Chapter  III. — Grecian  Law. 
Chapter  IV. — Roman  Law. 
Chapter  V.  — English  Common  Law. 


AMERICAN  EXTENSION  UNIVERSITY 

(non-resident  instruction.) 
Chartered  under  the  Laws  of  California 

Extension  Law  Course. 

LESSON  I.— 

Title  L  — Legal  Outlines. 

Title  IL — History  of  Law. 

By  C.  H.  Sayles,  LL.B. 


TITLE  I. — Legal  Outlines 


CHAPTER  I 
elementary  principles. 

81.  Law  in  General. 

2.  Definition.  » 

3.  Purpose  of  Law. 

4.  The  Rule  of  Precedent. 

5.  Foundations  of  Law. 

6.  Legal  Rights  and  Duties. 

7.  Wrongs — Public  and  Private. 

^l.  Law  in  General. — All  things,  material  and  spiritual, 
animate  and  inanimate,  within  the  realm  of  human  knowledge, 
observation,  experience  and  endeavor,  are  subject  to  law.  The 
foundation  of  social  order,  the  evolution  of  public  and  private 
rights,  and  the  basic  factor  of  all  human  progress,  is  law. 

Law  in  the  general  sense,  is  simply  a  rule  of  action.  That 
action  may  be  that  of  nature,  or  of  man.  The  law  of  nature  is 
the  basis  of  many  sciences. 

Law,  as  formulated  by  man,  is  a  purely  technical  term,  with 
which  alone  these  lectures  deal.  As  a  governing  instrumentality 
in  human  aflfairs  it  is  a  science  which  concerns  and  affects  all 
mankind. 

52.  Definition. — In  its  technical  and  most  common  use, 
the  term  "law1has^been_defined  as  "a  rule  of  civil  conduct  pre- 
sqjbfid  by  the  supreme  power  in  a  state,  commanding  what  is 
right  arid  prohibiting  what  is  wrong.'"  Bouvier's  Law  Dic- 
tionary defines  the  laws  of  a  Comriibnwealth  to  be  "those  rules 
and  principles  of  conduct  which  the  governing  power  in  a  coni- 

'Blackstone  Comm.,  14. 


26  AMERICAN  EXTENSION  UNIVERSITY 

munity  recognizes  as  the  rules  and  principles  which  it  will  en- 
force or  sanction,  and  according  to  which  it  will  regulate,  limit 
or  protect  the  conduct  of  its  members."  The  Supreme  Court  of 
the  United  States  has  defined  the  laws  of  a  State  thus :  "The 
rules.,  and  enactments  promulgated  by  the  legislative  authority" 
tliereof,  or  long  established  local  customs  having  the  force  of 
laws/"    • 

§3.  Purpose  of  LAW.-^The  purpose  of  law  is  the  promo- 
tion of  private  and  public  welfare  and  the  protection  of  estab- 
lished rights.  '^  Progress  requires  sound  rules  of  conduct — rules 
that  are  protective  of  existing  rights,  or  remedial  or  punitive 
in  cases  where  they  are  disregarded  and  infringed.  The  only 
theory  which  justifies  legislation,  and  all  forms  of  governmental 
control,  is  the  general  good  of  the  community  thereby  affected. 
The  United  States  Supreme  Court,  on  this  question,  has  well 
said:  "All  laws,  all  political  institutions,  are  dispositions  for 
the  future,  and  their  professed  object  is  to  afford  a  steady  an(J 
permanent  security  to  the  interests  of  society.'" 

H.  The  Rule  of  Precedent. — What  is  known  as  the  Rule 
of  Precedent — sometimes  called  "Stare  Decisis" — is  of  prime 
importance  in  the  study  and  practice  of  law.  This  rule  may  be 
defined  as  that  requirement  compelling  the  following  of  estab- 
lished legal ,  doctrine  of  "decisions  in  like  cases.  That  is  to 
say,  where  the  courts,  upon  a  given  state  of  facts,  and  upon 
sound  legal  reason,  have  come  to  a  conclusion  of  law  and  de- 
cided accordingly,  that  decision  makes,  and  is,  the  law  of  the 
realm  subject  to  the  jurisdiction  of  such  courts,  for  all  time 
thereafter,  on  the  point  or  points  involved  in  such  case,  unless, 
and  until,  it  is  reversed  by  a  higher  court,  or  is  abrogated  by 
legislative  action.  The  decisions  of  the  highest  court  having 
jurisdiction  are  the  true  precedents,  and  the  rule  of  precedent 
requires  that  these  decisions  be  followed  in  subsequent  cases 
involving  like  issues. 

A  rule  of  law  so  established  cannot  be  disregarded  merely 
because  the  courts  come  to  consider  it  unjust,*  or  inconvenient."' 
The  proper  remedy  in  such  cases  is  legislative,  not  judicial. 
A  precedent,  if  flatly  absurd  or  unjust,  may  be  disregarded, 
and  must  be  if  set  aside  by  legislation. 

'Swift  vs.  Tyson^S;4_ Peters,  18.  'Childress    vs.    Emory,    8    Wheaton 

■Rector,  etc.,  of  ChftstChurch,  vs.      672. 
Philadelphia  County,  24  H<oward  302.  *Ex  parte  Kearney,  7  Wheaton  45. 


DEPARTMENT  OF  LAW  37 

The  great  body  of  expressed  law  is  not  found  in  statutes 
or  codes  enacted  by  legislatures.  It  is  that  which  is  created 
by  the  final  decisions  of  the  courts,  deduced  from  legal  remedies 
applied  in  cases  similar  to  the  one  at  issue.  Accordingly  a 
condition  of  facts  wholly  dissimilar  to  any  that  has  ever  pre- 
ceded it,  cannot  be  governed  by  precedent — as  there  has  been 
no  preceding  like  case — but,  itself,  is  a  precedent  for  succeeding 
similar  conditions. 

55.  FouNDAxiONS  OF  Law. — Lawjs  based  upon  the  exist- 
ence of  rights,  duties,  'wrongs  and  remedies.  For  instance: 
primitive  man,  even,  had  rights,  foremost  of  which,  as  with 
his  most  fully  civilized  descendent,  was  the  right  of  life.  Be- 
cause of  this  right,  a  duty  devolved  upon  others  to  respect  it; 
a  violation  of  that  duty  constituted  a  wrong,  and  that  wrong 
required  a  remedy. 

As  a  matter  of  fact,  however,  the  method  of  law  develop- 
ment thus  suggested,  is  exactly  the  reverse  of  the  process  by 
which  the  law  has  historically  evolved.  At^  the  outset  there  was 
— to  continue  the  illustration — no  declared  and  established  rule 
recognizing  the  inviolability  of  human  life,  and  providing  re- 
dress or  penalty  for  violence  against  it.  The  first  incident  in 
the  formation  of  the  law  against  homicide  was  the  homicide 
itself;  not  the  laying  down  of  a  rule  forbidding  it.  After  re- 
peated takings  of  human  life,  the  growing  aversion  thereto 
became  crystallized  into  an  unwritten,  and  later  into  a  written, 
rule  prohibiting  it,  accompanied  by  penalties  for  its  violation. 
And  thus  with  each  particular  of  the  existing  law." 

^6.  Legal  Rights  and  Duties. — Certain  legal  rights  are 
personal,  such  as  the  absolute  rights  of  personal  security,  per- 
sonal liberty  and  private  property.  Other  rights  are  relative, 
as  in  relation  to  others,  such  as  the  rights  and  the  duties  exist- 
ing between  fellow  citizens,  as  such,  those  between  private 
citizens  and  public  officers,  and  the  relations  between  master 
and  servant,  husband  and  wife,  parent  and  child,  guardian  and 
ward,  and  the  like.  Property  rights,  though  they  relate  pri- 
marily to  property,  are  none  the  less  personal  rights,  centering 
in  those  having  legal  relation  thereto. 

Duties  are  the  correlative  of  rights,  and  a  definition  of  one 
necessarily  makes  clear  the  meaning  and  legal  measure  of  the 
other. 

•See    "The    Foundations    of    Legal  Liability,"  Street,  Vol.  III.,  pp.  3-4. 


28         AMERICAN  EXTENSION  UNIVERSITY 

*7.  Wrongs — Public  and  PRivATE.-*-Public  wrongs  are 
those  of  such  a  character  that  they,  in  some  degree,  affect  the 
public  peace,  order  or  health,  even  though  the  immediate  vic- 
tims thereof  be  private  individuals.  ■  Such  wrongs  are  termed 
crimes.  \  For  public  wrongs  the  law  provides  only  punishment 
to  the  offenders,  except  that,  in  some  jurisdictions,  in  Certain 
cases,  where  restitution  is  possible,  it  is  prescribed,  or  allowed, 
as  a  part  of  the  penalty.^ 

/Private  wrongs  are  all  wrongs  perpetrated,  willfully  or 
negligently,  by  one  person  upon  another,  not  amounting  to 
crimes,  and  yet  of  sufficient  gravity  to  require  legal  remedy.^ 
These  wrongs  are  termed  torts.  For  private  wrongs  the  law 
purports  to  provide  redress  against  the  perpetrator  in  the  form 
of  monetary  damages,  or  of  property  restitution,  or  both. 


CHAPTER  II. 


CLASSIFICATIONS  OF  THE  LAW 


58.  Substantive  and  Adjective  Law. 
9.  Municipal  Law. 
10.  International  Law. 
U.  Martial  and  Maritime  Law. 

12.  Basis  of  American  Law. 

13.  Varying  Systems  of  Pleading. 

14.  Relative  Importance  of  Written  Laws. 

15.  Equity — Its  Source  and  Jurisdiction. 

'8.  Substantive  and  Adjective  Law. — All  law  is  capable 
of  classification  into  either  Suhgtantive  or  Adjective  jaw. 

(Substantive  law  embraces  all  provisions  which^late  to  the 
rights  and  obligations  of  individuals  between  themselves,  be- 
tween individuals  and  the  community  at  large,  and  of  the 
wrongs  which  violate  such  rights  and  obligations.  ^ 

^djective  law  has  to  do  solely  with  the  rules'  of  legal  pro- 
ceaure  and  practice  by  which  such  rights  and  obligations  are 
upheld  and  enforced,  and  such  wrongs  redressed  and  punished) 

The  great  body  of  the  law  is  substantive,  and  it  is  this  por- 
tion which  is  chiefly  being  added  to  constantly,  as  the  science 
of  jurisprudence  progresses.' 

*9.  Municipal  Law. — The  term  "municipal,"  as  thus  used, 
refers  to  a  state  or  nation,  and  not  merely  to  its  primal  mean- 
ing of  a  city,  town  or  other  minor  part  of  the  body  politic. 

*A    reference    to    the    chart    hereto      ly  discerning  these  classificatioas. 
appended  will  aid  the  student  in  clear- 


vi 


DEPARTMENT  OF  LAW  29 

Municipal  law  is  that  body  of  rules  prescribed  by  the  govern- 
mental power,  either  by  legislative  act,  or  by  recognition  and 
enforcement.  If  by  the  former  method,  they  are  known  as 
"written ;"  if  by  the  latter,  as  "unwritten"  laws.  In  either  in- 
stance, however,  they  are  equally  obligatory.  It  is  this  de- 
partment of  law  with  which  the  practitioner  is  chiefly  con- 
cerned, and  to  which  Blackstone  referred  in  giving  his  defini- 
tion of  law  previously  quoted.* 

510.  International  Law. — Of  no  less  importance,  but 
perhaps  less  urgent  in  one's  immediate  needs  in  the  study  of 
elementary  legal  principles,  is  the  law  of  nations,  or  interna- 
tional law.  For  our  present  purposes  it  is  sufficient  to  say  that 
it  comprises  the  body  of  obligations  due  from  one  sovereignty, 
or  the  citizens  thereof,  to  another  sovereignty,  or  its  citizens, 
and  that  it  is  either  public  or  private.  The  subject  in  general, 
and  as  to  its  subdivisions,  will  be  fully  treated  in  due  course, 
hereafter. 

511.  Martial  and  Maritime  Laws. — The  nature  and 
scope  of  these  divisions  of  the  law  is  clearly  indicated  by  their 
names.  (The  former  is  that  system  of  rules  dominant  and  en- 
forcible, — in  this  country, — only  in  time  of  war,  or  of  other 
great  public  calamity  or  peril,  when  the  municipal  law  is  sus- 
pended at  the  seat,  or  in  the  immediate  vicinity,  of  military 
operations.)  Wilh  the  passing  of  the  occasion  for  military  su- 
premacy, martial  law  must  yield  to  the  civil,  or  municipal  law. 

Maritime  law  relates  solely  to  commerce  on  navigable  wa- 
ters, to  navigation  of  vessels,  their  rights  and  restrictions,  and 
those  of  the  seamen  thereon,  to  persons  and  property  in  trans- 
portation thereby,  and  to  all  marine  affairs.  The  United  States 
courts  have,  by  constitutional  provision,  exclusive  jurisdiction 
over  all  admiralty,  or  maritime  matters. 

512.  Chief  Basis  of  American  Law. — The  principal  basis 
of  the  law  of  all  the  States  in  this  country,  excej^tJLouisiana, 
whose  judicial  system  is  founded  upon  the  Roman  law7  as 
modified  by  the  Code  Napoleon,  is  the  Common  Law  of  England. 
Most  of  the  States  have  provided  that  the  law  of  England,  com- 
mon and  statute,  up  to,  at  least,  the  fourth  year  of  James  L, 

*For  a   full   explanation   and  inter-      Blackstone  Comm.,  44-46. 
pretation     of    municipal    law,    see    1 


30  AMERICAN  EXTENSION  UNIVERSITY 

shall,  with  certain  specified  exceptions,  be  accepted  as  the  basis 
of  the  law  of  such  States.' 

The  United  States,  as  such,  has  no  common  law.  The  only 
Federal  law  is  the  United  States  Constitution  and  its  statutes 
and  treaties. 

§13.  Varying  Systems  of  Pleading. — The  States  having, 
as  stated,  adopted  the  English  substantive  common  law,  ac- 
cepted also  its  common  law  system  of  pleading  and  practice, — 
that  is  to  say,  its  adjective  law.  This  system  was  cumbersome, 
burdened  with  a  multitude  of  formalities  and  unreasonable 
technicalities,  and  was  soon  found  to  be  unsuited  to  modern 
business  interests.  A  few  States,  however,  still  retain  that  sys- 
tem almost  in  its  entirety,"  but  in  far  the  larger  number  legal 
procedure  has  been  radically  modified. 

Several  Commonwealths  have  adopted  what  are  called  Prac- 
tice Acts,  abrogating  the  most  serious  objections  to  the  common 
law  system,  while  retaining  other  salient  features."  Nearly, 
one-half  of  the  total  number,  though,  have  wholly  abolished 
the  old  method,  and  established  the  code  system,  under  which, 
in  concise  terms,  rules  are  laid  down  for  the  guidance  of  court, 
litigants  and  lawyers,  and  compelling  directness,  exactitude  and 
simplicity  in  legal  practice."  Certain  of  those  which  have  thus 
come  to  be  known  as  code  States  have  amplified  the  code  system 
of  government  so  that  it  controls,  not  merely  the  course  of  legal 
procedure,  but  covers,  in  its  several  departments,  practically 
all  the  social,  civil,  and  political  relations  of  the  citizenship 
and  of  the  State. 

y^  ^14.  Relative  Importance  of  Written  Laws. — The  rel- 
ative importance  of  the  written  laws  in  the  United  States  is  as 

"At  the  time  of  the  Revolution,  the  inois.   New   Hampshire,   New  Jersey, 

people   of  the   colonies,  being  chiefly  Rhode  Island. 

emigrants  from  England,  knew  no  "Practice  act  States:  Alabama,  Ar- 
laws  other  than  those  they  had  kansas,  Delaware,  District  of  Colum- 
brought  with  them  from  their  father-  bia,  Maine,  Maryland,  Massachusetts, 
land.  Upon  attaining  their  independ-  Michigan,  Mississippi,  New  Mexico, 
ence  they  naturally  adopted  the  body  Ohio,  Pennsylvania,  Tennessee,  Ver- 
of  this  familiar  law  as  the  basis  of  mont,  Virginia,  West  Virginia, 
their  own  independent  jurisprudence,  "Code  States:  Alaska,  Arizona,  Cal- 
so  far  as  it  was  applicable  to  their  ifornia,  Colorado,  Connecticut,  Geor- 
new  social  and  national  condition.  gia,  Idaho,  Indiana,  Iowa,  Kentucky, 
Accordingly  such  portions  of  the  Kansas,  Louisiana,  Minnesota,  Mis- 
English  law,  statute  and  common,  souri,  Montana,  Nebraska,  Nevada, 
with  the  exception  noted,  in  force  New  York,  North  Dakota,  North  Car- 
prior  to  the  Revolution,  became  the  olina,  Oklahoma,  Oregon,  South  Car- 
common  law  of  this  country,  olina,    South    Dakota,    Texas,    Utah, 

"Common  law  States:   Florida,   111-  Washington.  Wisconsin,  Wyoming. 


^        DEPARTMENT  OF  LAW  31 

follows:  (1;  Constitution  of  the  United  States;  (2)  treaties 
and  laws  made  in  conformity  therewith;  (3)  State  constitu- 
tions; (4)  State  statutes;  (5)  municipal  ordinances. 

/pThe  United  States  Constitution,  and  the  Federal  statutes 
and  treaties,  are  the  supreme  law  of  the  land  and  must  be  up- 
held in  every  State,  Territory  and  Province  of  the  Union^  The 
laws  of  the  individual  States  and  other  subdivisions  of  the 
country  are  enforcible  only  within  their  respective  boundaries, 
with  certain  exceptions  to  be  noted  under  the  head  of  Private 
International  law.  Municipal  ordinances  must  always  give 
precedence  to  national  and  State  laws,  if  in  conflict  therewith, 
and  are  of  effect  only  within  the  limits  of  the  municipality 
which  enacted  them. 

>CU5.  Equity — Its  Source  and  Jurisdiction. — Out  of  the 
inadequacies,  rigors,  unyielding  technicalities,  and  consequent 
injustices  of  the  English  common  law,  arose  the  English  system 
of  equity  jurisprudence,  to  do  justice,  and  compel  right  and 
conscionable  dealing  between  litigants."  Its  province  is  to 
give  relief  where  the  remedies  of  the  common  law  fail  or  are 
inadequate.  But  for  its  administration,  many  wrongs  would  go 
unredressed,  and  many  rights  unvindicated.  Its  appeal  is  to 
conscience — to  that  which  is  morally  right — rather  than,  as  at 
law,  to  that  which  is  legally  obligatory.  For  example,  the  law 
will  hold  one  to  a  deed  executed  by  him,  even  though  its  exe- 
cution was  procured  by  fraud;  but  a  court  of  equity  will  set  it 
aside.  Again,  the  law  affords  no  escape  from  the  contract  of 
marriage,  but  equity,  for  prescribed  reasons,  will  break  off  the 
lesfal  bands.^ 


-fe 


^ 


The  English  equity  system,  acquired  by  the  States  adopting 
the  English  common  law,  has,  like  its  fellow,  been  materially 
altered,  in  most  jurisdictions,  so  as  to  conform  it,  in  practice, 
to  present-day  conditions.  Its  history,  development  and  modern 
method  of  application  will  be  fully  presented  in  due  course. 

"Reeves,   in   the   second  volume  of  Henry  VI.  that  equity  decisions  were 

his  History  of  the  English  Law,  pp.  reported. 

466,   600,   gives   an   excellent   account  i;  >v"The   principal  subjects  within  the 

of    the    rise    and    growth    of    equity  ,  jurisdiction    of    equity    are    accident, 

jurisprudence,    and    there   points    out  account,     foreclosure     of    mortgages, 

that  it  originated  in  the  reign  of  Will-  interpleader,    injunction,    partition    of 

iam  the  Conquerer,  was  substantially  joint  estates,  specific  performance  of 

broadened  in  the  days  of  Richard  II.,  contracts,  and  trusts  and  trustees, 
but  that  it  was  not  until  the  time  of 


32  AMERICAN  EXTENSION  UNIVERSITY 

CHAPTER  III. 

WHERE  TO  FIND  THE  LAW 

S16.  In  General. 

17.  "Written  Law." 

18.  "Unwritten,"  or  "Judicial"  Law. 

^16.  In  General. — Law  is  the  product  of  evolution.  In 
studying  it  consideration  must  constantly  be  given  to  the  ad- 
vanced and  advancing  condition  of  the  world  today,  over  that 
which  existed  when  certain  laws  under  consideration  were  en- 
acted, or  certain  decisions  were  rendered.  Given  a  certain 
statement  of  facts,  the  searcher  for  the  law  governing  same 
naturally  will  not  expect  to  find  legislative  or  judicial  action 
pertinent  thereto  at  a  date  when  the  stated  conditions  would 
have  been  impossible.  However,  law  upon  similar  conditions 
of  fact,  dissimilar  in  incident  though  the  latter  may  be,  is  often 
of  great  value. 

817.  "Written  Law." — The  most  apparent,  and  accord-, 
ingly  that  which  we  may,  for  convenience  here,  take  as  the  first 
source  of  legal  information, — and  to  the  authority  of  which, 
while  they  are  in  force,  all  legal  rules  emanating  from  all  other 
sources  must  conform, — are,  as  has  already  been  intimated,  the 
constitution  and  treaties  of  the  United  States,  the  constitutions 
of  the  respective  States,  and  all  acts  of  the  legislative  depart- 
ments of  State  and  Nation  enacted  in  conformity  therewith. 

5 18.  "Unwritten,"  or  "Judicial"  Law. — However,  be- 
cause all  legislative  enactments,  and  even  constitutions  them- 
selves, are  expressions  merely  of  the  then  will  of  those  thereby 
governed,  which  expressions  may  at  any  time,  in  due  course, 
be  materially  changed,  and  even  entirely  abolished  by  those  who 
created  them,  they  are,  in  the  acquirement  of  true  legal  learn- 
ing, subsidiary  to  the  mastery  of  those  rules  of  legal  reasoning 
and  interpretation,  without  which  constitutions,  statutes  and 
codes  would  be  dormant  and  forceless,  or  the  instruments  of 
erratic  tyranny. 

These  rules  of  legal  reason — the  supremely  important  part 
of  the  law-student's  study,  and  of  the  skilled  practitioner's 
equipment — are  to  be  found  primarily  in^  the  reported  decisions 
of  the  courts  of  England  and  America,  and,  secondarily,  sum- 
marized therefrom  in  legal  text-books,  the  judicial  discussions 
of  legal  publicists,  the  formulated  and  systematized  courses  of 
law  schools,  and  the  like. 


DEPARTMENT  OF  LAW  33 

This  portion  of  our  jurisprudence  constitutes  the  large  bulk 
of  applied  law,  whereby  the  principles  involved  in  written  en- 
actments, and  the  unwritten  principles  of  the  common  law,  are 
fitted  to  the  varied  and  varying  conditions  of  individual  and 
communal  life,  and  is  sometimes  called  "judicial  law"  to  dis- 
tinguish it  from  the  enacted,  or  "written"  law.  Technically 
speaking,  therefore,  judicial  law  is  "imwritten"  law." 


TITLE  11. 

HISTORY  OF  THE  LAW 


CHAPTER  I. 


ORIGIN  OF  THE  LAW 


§19.  Value  of  Legal  History  and  Theory. 

20.  Earlier  Forms  of  Law — Its  Development. 

21.  Earlier  Governmental  Forms — Development. 

519.  Value  of  Legal  History  and  Theory. — Whoever 
aspires  to  pre-eminence  in  the  legal  profession,  must  have  a 
thorough  knowledge  of  the  doctrines,  principles  and  rules  of 
law  as  a  classified  and  orderly  whole,  exhibiting  the  law,  thus, 
in  its  true  light  as  a  science.  >To  be  a  thoroughly  accomplished 
lawyer,  the  student  must  explore  far  beyond  the  law*s  imme- 
diate boundary  lines,  and  ascertain  its  origin,  follow  its  de- 
velopment, and  note  the  function  it  has  at  various  epochs  filled 
in  human  affairs.  This  study  is  rightly  termed  the  philosophy 
of  the  law.)  Some  practitioners  delight  to  criticise  such  study 
as  being  without  practical  value,  and  declare  it  to  be  wholly 
academic.  f'Those,  however,  who  have  stood,  and  who  today 
stand,  at  the  head  of  the  profession,  enriching  and  adorning 
it,  as  well  as  being  its  recognized  most  efficient  ministers,  are 
those  who  have  gone  deepest  into  the  history  of  its  causes, 
changes,  administrators,  theorists,  and  preservers.  The  stu- 
dehris  therefore  urged  to  extend  his  historical  studies  of  the 
law  far  beyond  what  it  is  practicable  for  these  lectures  to  carry 
him.  ^ 

"The  decisions  of  the  courts  of  ap-  part  of  every  law  library.     Complete 

pellate  jurisdiction,  Federal  and  State,  information    as    to    same    and    their 

are  published  in  book  form  at  regular  service  in  study  and  in  practice  will 

intervals,  and  constitute  an  important  be  given  later  in  the  course. 


34  AMERICAN  EXTENSION  UNIVERSITY 


§20.  Earlier  Forms  of  Law — Its  Development. — Law 
antedates  written  history  and  its  origin  is  accordingly  obscure. 
/Among  primitive  peoples  the  law  at  first  evidently  derived  its 
force  from  the  right  of  might  alone,  and  later  from  custom 
thereby  created.^  It_sQpii  became  apparent  that  the  proper  reg- 
ulation of  family,  communities  and  other  groupings  forming_ 
the  social  order,  required  fixed  and  recognized  rules  of  conduct 
to  avert  personal  rapacity  and  general  disorder.  Thus  were 
developed  laws  governing  the  domestic  relations,  fixing  title 
and  possession  to  personal  property,  giving  retribution  for 
crimes  and  recompense  for  torts.  Subsequently  when  the  wan- 
dering families  and  tribes  began  to  settle  in  permanent  loca- 
tions, rights  of  real  property  were  established,  and  those  af- 
fecting barter,  sale,  loaning,  and  like  early  transactions  of  a 
commercial  nature  were  gradually  evolved.  ^     ■—-*-««.       ■-- 

§2L  Early  Governmental  Forms — Development. — The 
primal  forms  of  government  were  based  upon  the  family  re- 
lation as  their  type.  The  authority  of  th^  father  over  the  in- 
dividual members  of  the  family  and  over  their  blended  or  com- 
mon interests,  grew  into  the  dominance  of  the  patriarch  or 
chieftain  over  the  tribe.  "'Thence  into  the  superior  aiitHority 
of  a  group  of  chieftains,  and,  by  due  expansion,  into  those 
forms  of  supreme  communal  command,  ranging  from  the 
barbaric  to  the  most  highly  advanced  systems  of  the  most  cul- 
tured epochs,  and  the  completest  of  codes. 


CHAPTER  II. 


BABYLONIAN   LAW 
822.  Most  Ancient  Code — Chief  Features. 

522.  Most  Ancient  Code — Chief  Features. — The  oldest 
known  code  of  laws,  and  probably  the  most  ancient  code  of 
importance,  is  that  of  Hammurabi  (Khammurabi).  The  exact 
date  of  its  establishment  is  uncertain,  but  it  has  been  estimated 
as  being  the  law  of  Babylon  between  the  years  2000  and  3000 
B.  |C.  Babylonian  jurisprudence,  however,  did  not  reach  its 
perfection  until  a  much  later  date,  at  the  time  of  its  overthrow 
by  ^ersia. 

/The  adjective  law  of  Babylon  never  attained  the  perfection 
of  its  substantive  law.J^Law  was  administered  chiefly  by  the 


DEPARTMENT  OF  LAW  35 

priests, 'land  its  procedure  consisted  largely  of  long  and  formal 
oaths,  rather  than  by  relying  upon  direct  evidence.  Witnesses, 
to  a  certain  extent,  acted  in  the  capacity  of  jurymen. 

The  family  was  the  unit  of  government.  Marriage  was  by 
purchase  of  the  bride  from  her  parents.  It  was  the  subject  of 
contract;  was  accompanied  by  a  complete  adjustment  of  prop- 
erty rights ;  and  usually  contained  provisions  covering  the  basis 
of  possible  divorce.^^  Married  women,  although  regarded  with 
great  respect  by  their  children,  were  virtually  slaves  of  their 
husbands.  Adoption  and  emancipation  of  children  were  pro- 
vided for. 

The  law  of  property,  real  and  personal,  was  well  developed. 
/The  methods  of  conveying  and  encumbering  real  estate  were 
similar  to  those  of  the  present  day./  The  party  conveying  al- 
ways had  the  right  of  repurchasing  the  property  sold,  at  the 
price  he  received  for  it,  unless  he  expressly  waived  such  right  in 
the  deed.)  f'Mortgages,  pledges  and  other  forms  of  security  for 
money  borrowed,  were  very  common.)  Wills  were  not  known 
under  this  law,  the  gift  of  real  property  oy  the  owner,  with  a 
reservation  to  himself  of  a  life-interest  therein,  making  such 
instruments  unnecessary.  Personal  property  law  was  more 
highly  advanced  than  under  the  early  English  common  la\^ 

(Babylon,  being  a  great  commercial  center,  naturally  had 
legal  provisions  of  large  scope  and  much  nicety  affecting  con- 
tracts of  all  kinds,  and  the  various  transactions  of  commercial 
life.y  Future  as  well  as  present  transactions  could  be  made 
the  subjects  of  contract.  Agency,  partnership,  brokerage,  and, 
in  fact,  much  of  the  present-day  commercial  system  was  the 
subject  of  this  law.; 

Babylonian  jurisprudence,  or  at  least  many  of  its  most 
salient  features,  were  appropriated  and  preserved  by  the.  con- 
quering Persians,  and  by  them  diffused  throughout  a  vast  ter- 
ritory. 

"A    typical    marriage    and    divorce  then  shall  she  be    .    .    .    and  thrown 

contract  is  the  following,  taken  from  into    the    water.      If    Remu    says    to 

Lee's    Historical   Jurisprudence,    Part  Bastu,   his   wife,    "Thou   art   not   my 

I.,  Chap.  1:  wife,"  he  will  give  her  ten  shekels  of 

"Remu,    the    son    of    Sanhatu,    has  silver  as  her  quit-money, 
taken  in  marriage  Bastu,  the  daughter  "Samas-rabi  has  put  Naramtu  away. 
of  the  priestess  Samas,  Belisumu,  the  She   bears  her  ziku   (?)   and  has  re- 
daughter  of  Ugibitu.    shekels  ceived   her   quit-money.     If  Naramtu 

of  silver  is  her  gift;  since  she   (i.  e.,  is  married  to  another,  Samas-rabi  will 

the  mother),  has   received  it,   she  is  not   love   her  more."     (Followed  by 

content.    If  Bastu  says  to  Remu,  her  oath,  date  and  witnesses.) 
husband,  "Thou  art  not  my  husband," 


36  AMERICAN  EXTENSION  UNIVERSITY 

CHAPTER  III. 

GRECIAN  LAW 
i23.  Origin  and  Salient  Features. 

§23.  Origin  and  Salient  Features.*— The  ancient  Greeks, 
although  not  regarded  as  great  law-makers,  wisely  accepted 
the  principal  property  and  commercial  features  of  the  Baby- 
lonian system,  and  the  provisions  of  the  maritime  laws  of  the 
Phonecians,  and  on  this  basis  ultimately  constructed  an  exact 
and  effective  jurisprudence. 

The  laws  of  Athens,  as  the  most  cultured  and  advanced 
province  of  the  nation,  became  the  most  highly  developed,  and 
is  taken  as  the  type  of  Grecian  law.. 

The  adjective  law  of  Greece — directly  contrary  to  that  ot 
Babylon,  its  great  progenitor — was  far  in  advance  of  its  sub- 
stantive law.  Legal  procedure  thereunder  was  quite  similar  to 
that  of  the  common  law  courts  of  England  later.  The  judge 
usually  prepared  a  report  of  the  case  before  him,  which  he 
submitted  to  the  dicastery — a  form  of  jury — who  thereon  de- 
cided the  case  by  vote.~^  The  execution  of  judgments  of  the 
courts  was,  in  most  instances,  left  to  the  successful  party.  In- 
deed this  method  was  Jollowed  under  nearly  all  ancient  sys- 
tems. 

The  substantive  law,  aside  from  that  taken  from  the  Baby- 
lonian, was  principally  concerned  with  domestic  relations,  torts 
and  crimes.  In  Sparta,  marriage  was  accomplished  by  capture 
of  the  bride ;  in  Athens,  it  was  by  purchase.  Divorce  was  freely 
given  the  husband.  The  wife  was  without  any  legal  rights  of 
importance. 


CHAPTER  IV. 


ROMAN   LAW 


§24.  Greatest  of  Legal  Systems. 

25.  Origin  and  Growth. 

26.  The  Roman  Codes. 

27.  Civil  and  Canon  Laws. 


524.  Greatest  of  Legal  Systems. — The  Roman  law  is  the 
one  system  of  jurisprudence  which  stands  out  in  high  prom- 
inence over  all  others.  It  survived  the  destruction  of  empires, 
as  time  passed  its  wisdom  and  strength  was  increasingly  ap- 
preciated, and  it  has  become  the  basis  of  the  great  legal  systems 


DEPARTMENT  OF  LAW  37 

of  two  continents.  No  other  judicial  system  is  worthy  of  being 
placed  by  its  side,  with  the  possible  exception  of  the  English 
common  law — itself  in  large  part  founded  thereon. 

525.  Origin  and  Growth. — By  the  discovery  of  the  In- 
stitutes of  Gains,  in  1816,  a  complete  view  of  the  Roman  legal 
system  as  it  existed  three  centuries  and  a  half  before  the  time 
of  Justinian — its  great  codifier — was  obtained.  We  find  therein 
the  same  elements  and  development,  the  same  general  family 
organization,  and  the  same  evolution  therefrom  of  the  state, 
as  in  earlier  systems.  But,  while  Rome  passed  through  the 
same  progressive  stages  as  other  nations,  she  advanced  far 
beyond  where  they  had  stopped. 

Rome  became  a  republic  about  500  B.  C.  .  For  nearly  two 
hundred  years  thereafter  the  plebians,  or  common  people,  were 
in  constant  contest  with  the  patricians,  or  aristocracy,  for  politi- 
cal supremacy.  {They  finally  obtained  equal  civil  rights,  and 
soon  created  a  distinctly  plebian  assembly^  About  450  B.  C, 
ten  men,  known  as  the  decemvirs,  were  elected  to  draw  up  a 
codification  of  the  law.  Ten  tables  were  prepared  the  first  year, 
and  set  up  in  the  forum.  The  next  year  two  more  were  added, 
thus  constituting  the  Twelve  Tables,  famous  as  the  first  au- 
thentic compilation  of  Roman  law,  and  regarded  as  the  founda- 
tion of  Roman  jurisprudence  up  to  the  time  of  Justinian,  500 
A.  D."  — ^  - 

After  the  fall  of  the  Republic  in  the  first  century  B.  C,  the 
sole  power  of  law-making  lay  in  the  Emperor.  Laws  which 
owed  their  authority  to  him  were  called  constitutiones. :  The 
Emperor  appointed  certain  leading  lawyers,  known  as  juris 
consults,  whose  decisions  on  legal  questions  were  cited  in  court 
as  authority  upon  disputed  points  of  law.  These  decisions  were 
termed  jus  respondendi.  From  the  membership  of  the  juris 
consults  came  the  great  law  writers,  Gains,  Scaevola,  Paulus, 
Julianus,  Papinian  and  others. 

526.  The  Roman  Codes. — Previous  to  the  reign  of  Jus- 

"These  tables  made  provision  for  Roman  citizens,  hence  the  distinction 
the  government  of  Roman  citizens  in  legal  provisions  applicable  to  each, 
mainly,  as  a  consequence  of  which  a  Later  this  distinction  was  removed, 
department  of  law,  created  chiefly  for  but  the  principles  of  the  jus  gentium 
the  settlement  of  controversies  be-  were  retained  and  formed  a  control- 
tween  foreigners — and  known  as  the  ing  factor  in  later  Roman  law.  So, 
jus  gentium — was  formed.  Accord-  too,  it  was  part  of  the  law  which  be- 
ing to  the  early  Roman  view,  foreign-  came  the  prime  basis  of  modern  legal 
ers  were  denied  equal  privileges  with  systems. 


38         AMERICAN  EXTENSION  UNIVERSITY 

tinian,  the  Roman  laws  had  been  reduced  to  the  form  of  a 
code  several  times.  The  principal  compilation  of  this  kind  was 
that  under  Theodosius  IL,  in  435  A.  D.  This  was  supplanted 
in  the  folowing  century  by  the  Justinian  Code,  universally  rec- 
ognized as  the  most  magnificent  production  of  human  reason, 
and  the  most  potent  legal  system,  ever  framed.^®  Upon  the  fall 
of  the  Roman  Empire,  the  victorious  Teutonic  tribes  adopted 
parts  of  these  codes,  particularly  those  portions  applicable  to 
real  property." 

In  the  twelfth  century  the  Roman  law  was  fully  taken  as 
the  basis  of  legal  instruction  in  European  law  schools,  and  has 
ever  since  occupied  supreme  place  in  legal  opinion,  authority 
and  study. 

§27.  Civil  and  Canon  Laws. — The  term  "civil"  as  applied 
to  the  Roman  law  (the  jus  civile  Romanorum)  comprises  all 
laws  at  any  time  in  force  among  the  Roman  people.  /The  term 
"civil  law,"  however,  in  said  connection,  is  accepted  to  mean 
only  that  adaptation  of  such  law  to  meet  the  conditions  of 
Roman  life  at  the  time  of  the  reign  of  Justinian,  and  as  included 
in  his  compilations  thereof. 

•The  Canon  law  was  that  portion  of  the  Roman  law,  which 
by  reason  of  the  close  alliance  of  church  and  state  in  later 
Roman  history,  governed  ecclesiastical  affairs.  That  is  to  say, 
it  is  that  part  of  the  Roman  law  accepted  and  administered  by 
and  in  behalf  of  the  Catholic  Church.^^J 

"This  code  is  formed  of  the  fol-  tus,  made  necessary  by  the  later  con- 
lowing  compilations:  (1)  "The  Early  stitutiones  of  Justinian.  (5)  "The 
Code,"  compiling  the  imperial  consti-  Novels."  The  numerous  constitu- 
tutiones.  It  is  sometimes  called  the  tiones  issued  by  Justinian  after  the 
"Codex  Vetus,"  and  was  finished  in  publication  of  the  Codex  Vetus,  and 
529  A.  D.  (2)  "The  Pandects,"  or  making  many  material  changes  in 
Digest,  consisting  of  the  codification  the  law,  led  to  a  separate  collection 
of  the  entire  civil  law,  other  than  the  of  them  after  his  death,  and  these 
constitutiones.  This  was  issued  in  comprise  the  "Novellae  Constitu- 
533.  (3)  "The  Institutes,"  also  pub-  tiones,"  now  usually  called  the 
lished  in  533.    This  was  really  a  text-  "Novels." 

book  for  the  study  of  law,  and  "See  generally  on  this  topic  chap- 
founded  largely  upon  the  earlier  ter  44  of  Gibbon's  Decline  and  Fall 
works  of  Gaius.  Although  primarily  of  the  Roman  Empire, 
a  treatise,  it  was  given  the  authority  **The  canon  law  was  adopted  in 
of  enacted  law.  (4)  "The  New  Code."  toto  as  a  part  of  the  English  com- 
This  work  was  promulgated  in  534,  mon  law. 
and  was  a  revision  of  the  Codex  Ve- 


DEPARTMENT  OF  LAW  39 

CHAPTER  V. 

ENGLISH  COMMON  LAW 

528.  Derivation  and  Development. 

29.  Feudalism. 

30.  "Adjective  Law." 

§28.  Derivation  and  Development. — The  only  independ- 
ent system  of  unwritten  law  evolved  by  any  nation  of  modern 
times  is  that  of  the  English  Common  Law.  ^his  system  arises 
from  immemorial  custom  and  usage,  having  the  force  of  law, 
by  reason  of  judicial  recognition  and  sanctioni  It  is  based  upon 
the  crude  laws  of  the  ancient  Britons,  to  whicli  have  been  added 
from  time  to  time,  the  broadening  and  varied  rules,  culture  and 
customs  of  the  Romans,  Picts,  Saxons,  Danes,  Normans  and 
other  virile  peoples". 

(t'he  Jutes,  Angeles,  and  Saxons  settled  small  portions  of 
Britain,)  subjecting  the  inhabitants  to  a  more  or  less  tyrannic 
control.  The  political  institutions  growing  out  of  the  mingling 
of  these  powerful  tribes,  were  chiefly  the  rules  and  customs 
of  their  ancestors  as  affected  by  the  Roman  law,  after  the  over- 
throw of  the  Roman  empire,  as  already  noted.  In  time  Eng- 
land—or Angleland — ^became  divided  into  three  well-defined 
minor  kingdoms,  between  which  there  was  constant  rivalry  for 
supremacy,  and,  in  addition,  against  them  all,  stood  the  original 
Britons  seeking  to  regain  control  of  their  country. 

/The  kingdom  of  Kent  was  the  first  to  become  regulated  by 
a  definite  system  of  law/  Alfred  the  Great  mentions  King 
Aethelberbt  of  that  kingdom  as  one  of  the  great  law-givers 
from  whom  he  obtained  many  of  the  principles  incorporated 
in  his  own  legal  work.  Offa,  placed  on  the  throne  of  the 
Anglo-Saxon  kingdom  there,  is  another  king  whose  laws  were 
the  foundation  of  Alfred's  wise  system.  After  his  repulse  of 
the  Danes  in  878,  Alfred  devoted  the  remainder  of  his  life  in 
establishing  a  sounder  form  of  government,  based  on  fixed, 
systematized  laws,  ^is  work  in  this  particular  was  that  of 
codifying  the  laws  then  in  force  in  various  sections  of  the  king- 
dom, rather  than  in  the  making  of  wholly  new  law.) 

In  the  tenth  century  the  kingdom  so  strongly  built  up  by 
Alfred  was  overthrown  by  the  Normans,  the  then  most  civilized 
of  European  nations,  ^ith  the  exception  of  the  introduction 
into  England  of  the  Norman  feudal  system,  very  few  innova- 
tions in  English  law  were  made  by  William  the  Conquerer}  The 
changes  that  thereafter  took  place  were  made  gradually,  and 


40  AMERICAN  EXTENSION  UNIVERSITY 

only  in  rarely  exceptional  cases  was  there  any  radical  reform 
in  the  main  body  of  the  law. 

In  the  early  part  of  the  eleventh  century, — and  in  large  meas- 
ure defining  the  realms  subject  to  the  three  dominant  sovereign- 
ties we  have  referred  to, — there  were  three  well-defined  legal 
systems  there  in  vogue,  viz.,  (1)  the  Danish  laws;  (2)  the  Mer- 
cian laws;  and  (3)  the  West  Saxon  laws.  The  confusion  con- 
sequent upon  this  difference  of  legal  measures,  among  people 
in  a  common  land,  and  with  growing  common  interests,  and 
under  the  supreme  dominion  of  a  single  monarch,  led  to  the 
establishment,  by  King  Edward  the  Confessor,  of  a  uniform 
system,  extracted  from  the  three  above  named.  This  system 
was  thereafter  observed  throughout  the  entire  land,  and,  be- 
cause of  its  comprehensive  scope,  was  called  the  "common 
law.' 


>21 


*29.  Feudalism. — Feudalism  is  a  system  of  government 
employed  by  the  ruling  powers  in  the  early  history  of  Europe 
— and  by  most  of  said  powers  still  retained  in  some  modified 
form — whereby  the  inhabitants  of  the  kingdom,  in  return  for 
allotments  of  land,  bound  themselves  to  the  landowners  as  their 
masters;  and  under  which,  too,  the  subject  was  allotted  the 
ownership,  or  long  lease,  of  land  by  the  sovereign,  in  return  for 
military  services.  The  king  granted  land  to  his  tenants-in- 
chief,  who  in  turn  let — or  "feudated" — it  to  sub-tenants,  and 
they  to  others,  and  so  on  down  to  the  actual  tillers  of  the  soil. 
By  his  status  under  this  system  of  tenure  of  real  property,  the 
political,  social  and  economic  standing  of  every  inhabitant  was 
determined. 

Feudalism  as  it  existed  m  Europe  at  the  time  of  the  fall 
of  Rome,  differed  in  the  several  nations.  It  never  became 
established  in  this  country  as  a  recognized  legal  and  political 
institution." 

530.  Common  Law  "Adjective  Law." — The  early  Eng- 
lish adjective  law  continued  in  a  very  primitive  state  long  after 

**The  historical  steps  leading  up  to  History  of  English  Law;  Lee's  His- 
this  consummation  are  not  only  in-  torical  Jurisprudence;  Hallam's  Con- 
tensely  interesting,  but  of  much  prac-  stitutional  History  of  England;  and 
tical  value  to  the  student  of  law  who  White's  Outline  of  Legal  History, 
seeks  to  fit  himself  most  completely  "See  Robinson's  Elements  of  Amer- 
for  high  professional  standing.  We  ican  Jurisprudence;  Fiske's  Critical 
commend  the  careful  reading  of  the  Period  of  American  History;  and 
following  works  dealing  with  English  Vol.  4  of  Kent's  Commentaries  on 
legal  history:  Pollock  and  Martland's  American  Law. 


DEPARTMENT  OF  LAW  41 

the  Norman  invasion.  This  seems  somewhat  strange,  in  view 
of  the  material  advance  in  legal  conditions  and  in  substantive 
law  made  by  William  the  Conquerer.  Subsequent  to  1164, 
however,  when  Henry  11.  forced  upon  the  ecclesiastical  courts 
the  Constitution  of  Clarendon,  wherein  the  jurisdiction  of  such 
courts  was  definitely  marked  out  and  by  which  much  of  the 
complexity  and  uncertainty  of  legal  pleading  and  procedure 
was  removed,  we  find  the  system  of  legal  practice  gradually  im- 
proving. 

After  the  Barons  of  England,  in  their  triumph  over  kingly 
usurpations,  had,  in  1238,  decided  that  the  English  law  as  it 
then  stood  should  not  be  changed  to  correspond  with  the  Roman 
law,  the  adjective  as  well  as  the  substantive  law  became  a 
fixed  institution. 

During  this  century,  among  other  important  statutes  en- 
acted, was  that  of  Westminster  II.,  which,  by  its  failure  to 
provide  a  remedy  in  cases  for  which  there  was  no  form  of 
writ  of  complaint,  a  form  of  pleading  called  equity  pleading 
grew  up,  bringing  thus  a  new  element  in  the  adjective  law.^' 

^This  form  of  pleading  will  be  fully       the  Course, 
presented  under  its  own  title  later  in 


QUIZZER  ^i^^j 

ELEMENTARY    PRINCIPLES  «£  -^;:,  yw  ^     |w    '  " 

1-§1.       What  things  are  subject  to  law?        ^    ^       -vlr- — " 

2-  Define  law  in  its  general  sense.  i —    Ly^wT-«J2fi 

3-  With  what  kind  of  law  do  these  studies  deal ?  \^i  '-^^ ^'^^  • 

4-  Whom  HnpQ  it  pffert?     4"^   O-v-v  c^-v-^-Y  «^»-^ '^ 

^  wnom  aoes  it  anect.    -r--  ((UJU.  ^  Co-^tx.  v.^i*'^ 

5-^2.       Define  law  in  its  technical  sense./ l^s:c^'\Jt^.A-  >  ~^  ~~ 

6-  How  has  the  United  States  Supreme  Court  defined  the 

laws  of  a  State?  t^4_  \Zy^JU^  o-^  K  £nA•a.a^r-A-,^J^w6*~ 

7-^S.       What  is  the  purpose  of  law? 

8-  What  is  its  relation  to  progress? 

9-  What  theory  alone  justifies  legislation? 

10-H.     Define  the  Rule  of  Precedent,  or  "Stare  Decises^" 


42         AMERICAN  EXTENSION  UNIVERSITY  ,  Jr. 

1 1  -         What  constitute  true  precedents  ?  [^J{ji^  (L  V\<^^'^  j  ^ 

12-  Can  precedents  which  courts  come  'to  regard  as  im- 

practicable be  judicially  ignored?       -  r "      . 

13-  What  is  proper  method  of  correcting  such  precedent? 

14-  When  can  and  when  must  precedents  be  ignored?  .    . 

15-  Where  is  the  great  body  of  the  law  found? C^^^^^, 

16-55.  Upon  what  is  human  law  founded ?^)^ v|^   ^t^-y-v^x/'*^ 

17-         State  the  theoretical  and  the  actual  method  of  law  de- 
velopment. 

18-^6.     How  are  the  rights  of  persons  divided?    Illustrate. 

19-         Can  you  distinguish  between  legal  rights  ^nd  legal  du- 
ties.    ■  tvtr  ^  ^    '      I  - 

20-*/.     How  are  wrongs  classified  r  ' 

21-         Define  the  two  classes  of  wrongs,  and  give  name  desig- 
nating each.    9p^^^~^ 

w  22-         What  redress  does  the  laAV  provide  for  each  class  ? 

%J[ .  CLASSIFICATIONS  OF  THE  LAW  (;jjX^^  , 

-^      1-58.       How  can  all  law  be  classified  ?    Define  each.  A <^^ 

2-^9.       State  the  meaning  of  the  word  "municipal"  as  used  in 
•    the  term  "municipal  law."  -,     '^^c  c'i   •' 

3-  Define  "municipal  law." 

4-  What  is  the  distinction  between  "written"  and  "unwrit- 

ten" municipal  law  ?  . 

5-  Is  the  obligation  to  observe  both  forms  of  law  alike ?\|^ 

6-  What  is  the  relative  importance  of  municipal  law  to  the 

practitioner?    f^l^^^.,^  \ -^ '^' 


^^JJL>^  -  (^^^'-' 


7-^10.  Define  international  law. 

8-  State  its  two  classifications. 

9-  How  does  it  rank  in  importance  with  municipal  law? 
10-511.  What  is  martial  law? 


\^y 


DEPARTMENT  OF  LAW  43 

11-  When  is  it  invoked?    When  suspended? 

12-  Define  maritime  law.      >ie^xi^ 

13-  What  courts  in  this  country  have  exclusive  jurisdiction 

over  maritime  or  admiralty  affairs,  and  why?  ^x»^^-c  vo^-'l, 

14-512.  What  is  the  basis  of  the  law  of  most  of  the  States  in  this 
country  ?    ^^-^r>^  mJi'^^Ly, 

15-  What  State  alone  is  excepted  therefrom,  and  why?  cs-*^ 

16-  Why  have  the  States  this  common  basis  for  their  laws? 

17-  Has  the  United  States,  as  such,  any  common  law?  T^  <^ 

18-  What  is  the  only  purely  Federal  law?   C4r-\,x^^^Z<^t<XSt^t/r-z^ 

19-^13.  What  system  of  pleading  was  originally  adopted  by  the 
States  ?   /4--9'^-'yC.'«'Aj~  t-t^rw 

20-  What  were  the  objections  to  such  system? 

21-  Is  such  system  now  in  general  use  in  the  States  ?    Name 

any  changes,     oox^c  y^-^y^-O^^^-- — 

22-  What  are  "Practice  Acts"  ? 

23-  What  are  codes? 

24-  Name,  as  fully  as  possible,  the  States  using  the  respect- 

ive systems. 

25-U4.  State,  in  their  true  order,  the  relative  importance  of 
written  laws  in  this  country.      <«^  :i  v  j  - 

26-         Within  what  limits,  in  each  case,  are  these  laws  en- 
forceable ? 
27-§15.  Whence  did  what  is  known  as  equity  arise?  <\<jv*^  r^.*^<-^ 

28-  What  is  the  province  of  equity?  "^  ,  T"^"^  |Ax-'i-^(X«^  . 

29-  Give  examples  where  equity  gives  relief  not  afforded 

by  the  law.   k^^rCci^'  |-.'Ww  ^^^^-cA 

30-  Over  what  subjects  chiefly  has  equity  jurisdiction?  '^rd^ 


WHERE  TO  FIND  THE  LAW 


1-516.     What  consideration  must  be  kept  in  mind  in  the  search 
for  present-day  law? 


44  AMERICAN  EXTENSION  UNIVERSITY 

2-817.     What  is  the  most  accessible  source  of  information  as 
to  "written"  law? 

3-  What  is  the  measure  of  authority  of  same? 

4-*18.     To  what  is  "written"  law  subsidiary  in  importance  to 
the  student  and  practitioner?    And  why? 

5-  Where  are  the  rules  of  legal  reason  to  be  found,  pri- 

marily, and  secondarily? 

6-  What  is  the  relative  importance  of  judicial  decisions  in 

law  study  and  practice? 

7-  What  is  this  branch  of  the  law  sometimes  called  ?    And 

why? 

8-  Are  the  reported  judicial  decisions,  technicalfy  speak- 

ing, "written"  or  "unwritten"  law? 


HISTORY  OF  THE  LAW 


ORIGIN  AND  EARLY  GROWTH 


1-^19.  What  knowledge  is  essential  to  highest  professional 
standing? '''****'^^'^'^'^^^'  f  <v-c^«<i-|2Ci^ -*.  ;v>wix<».       . 

2-  What  is  known  as  the  "philosophy  of  law"  ?T  JLl'«»-cA«^^2.»v^t»^ 

3-820.  What  can  you  say  as  to  the  age  of  law  ? '^^T^ '^^^^ 

4-  From  what  did  law  originally  derive  its  force  PvvT^gij^ 

5-  How  was  systematized  law  developed,  and  whj?,^  e\da2 

6-  How  did  property  and  commercial  rights  first  evolve  P^'^,.,^ 
7-821.  Upon  what  were  early  forms  of  government  based  ?/ o-wwtJPL*' 
8-  Give  outline  of  governmental  development. 


BABYLONIAN   LAW 

1-822.     Name  the  most  ancient  legal  code  known,  and  its  ap- 

proximate  date. 

2-  When  did  Babylonian  jurisprudence  reach  its  perfec- 

tion? 


DEPARTMENT  OF  LAW  45 

3-  What  was  the  relative  position  of  adjective  law  at  that 

time?  '  '     '-^.    ^  .v.^.^c>.^    ^,'^- 

4-  By  whom  was  this  law  chiefly  administered?  QU-^X^^" 

5-  What  was  its  principal  method  of  proving  cases?  ^-'^^^^  ^^^ 

6-  In  what  double  capacity  did  witnesses  serve  in  litiga- 

tion? 

7-  What  was  the  unit  of  government  ?'^7^^  ^<?-^,-v-J:A^  • 

8-  State  the  nature  of  the  marriage  contract,  and  the 

status  of  married  women. '     (^^*<w«/vva-o  vUr^-uXi-^^-.  ^4^*^ 

9-  What  was  the  status  of  property-law  under  this  system  Pos^t^ 

10-  Name  any  special  right  in  grantors  to  real  property 

sold.  ---^  t*^     '  «4_ /*--«.*-. v,<>>-v&-a.^  ^i-  '-    >.  ■ 

11-  What  can  you  state  as  to  the  law  of  mortgages,  pledges 

and  the  like?  //ov^    c-^,-,---*^-  « • 

12-  How  was  the  necessity  of  wills  avoided  ?^--?-^  Kvx.c«.^^.i 

13-  State  what  you  know  as  to  the  law  of  contracts,  agency    , 

and  partnership  under  this  code.  u^«^  <^'\y<Jucrf^cJC 

14-  Was  Babylonian  jurisprudence  disseminated  to  other  / 

countries  to  any  extent?    If  so,  how?     .       ---    ;«.-<- 

C.- 


GRECIAN LAW 


1-^23.     Whence  did  Greece  receive  portions  of  its  jurispru- 
dence, and  what  were  they?^*--*"'^*^''^'*-'^  ^^^-»^^^-v- . 

2-  What  was  the  relation  of  Athenian  law  to  that  of  the 

rest  of  Greece  ?  A   'y'  A*.^  >-  ^"^^  . 

3-  What  relative  position  did  the  Grecian  adjective  law, 

occupy?       '"u  ^^  CicL\rO-x.i.*^£-    a-^  IC"  -'  <-    ■^''■■'■^'. 

4-  To  what  legal  system  in  modern  use  can  the  legal  pro- 

cedure of  Greece  be  compared  P^^^rvvvv-rvB^-Lo-w-c-r**-*^^  "^^ 

5-  Outline  the  usual  course  of  procedure  in  Greece.  Ji*-^ 

6-  How  were  judgments  enforced  and  was  the  method 

unlike  that  of  other  ancient  systems?  "^  /o.-.-c.et' 


46         AMERICAN  EXTENSION  UNIVERSITY 

7-  .        With  what  did  the  substantive  law  chiefly  deal? 

8-  ^tate  how  marriage  was  accomplished  in  Athens  and  in 

Sparta  "^  a  <v-i»-cCl^^4u  a^  hr^A.*.  .  o^'vU*^^  ^  j^iA^&4^t\ 

9-  What  were  the  rights  of  divorce,  and  what  were  the 

rights  of  wives    V^^-^^^y  '^v^t-  <l4^-<.z^.  „C 

ROMAN    LAW 

1-524.     What  is  the  status  of  the  Roman  law  in  companson  with 

.     other  legal  systems?  .2^*~*~'*^  <m.*./j-  U^  -Ki^^ ^^^-^v-l  ^ 

2-*25.     How  was  a  complete  view  of  the  ancient  law  of  Rome 
J,       V  obtained,  and  when  ?  -^^Co  ^.^r^ — *  «/7  >i^  &vv*5i:*iZ»^  ^ 

"^3-  What  do  the  Institutes  of  Gains  reveal  ?J;:3^^f^^^  ^ 

4-  In  what  did  Rome  differ  from  other  nations  m  its  legal 

standing?    £1  ^^-t--<a- c^^nfA. «vC<^-'^L^ ^  (J^jg^^ 

5-  When  did  Rome  become  a  republic?  vjo^,'^.^^        ' 

6-  What  political  or  social  divisions  existed,  and  what  was 

their  relative  legal  status  ?  (^^^^U^^,^^^,^^  _  Cpd,*^*^^*^ 

7-  What  were  the  "decemvirs,"  and  for  what  service  were 

they  appointed?   Cr^-^/vaw  .  -v^^  -    '<. 

8-  What  constitute  the  "Twelve  Tables"?   /-r-— ^*^^'^ 


/' 


9-  How  were  they  made,  and  when,  and  what  is  their  posi- 

tion in  Roman  jurisprudence?    1i-t,-x^\'%.,x.,^L>^^Z:^^^ 

10-  When  did  the  Roman  Republic  fall,  and  in  whom  there- 

after lay  the  legislative  power  ?/"="=*  ^<^  . 

11-  What  were  laWs  thus"  promulgated  called?  ^"^^  ^    c.g^a^S- 

12-  What  were  the  jus  gentinum?    State  their  original  pur- 

pose and  their  ultimate  service  to  law  in  general. 

13-  What  were  the  juris  consults,  what  service  were  they 

appointed  to  perform,  and  what  were  their  decisions 
termed?  ^u^  ^•0-'Xhr>^  ti^r  -.,.  /^ 

14-  Name  some  of  the  great  law  writers^  among  the  juris 

consults.  i^a~.rJu^  .    QcoLX.'-rvr'^^,   v^^-•X•^J       -  v^:, 

15-526.  State  what  you  can  as  to  the  early  Roman  codes.    Name 
the  first  great  code,  and  when  was  it  compiled? 


DEPARTMENT  OF  LAW  47 

16-  What  code  supplanted  all  others,  and  when,  and  what 

is  its  position  in  jurisprudence?  d^A^sttA^^Jin^  CatsS^A 

17-  Enumerate  the  several  divisions  of  the  Justinian  Code, 

and  state  when  each  was  promulgated. 

18-  What  happened  to  Roman  jurisprudence  upon  the  fall ,. 

of  the  Empire  ?  A  ^<j'U  <L.t':.x_  ^  -r    'X«--«-X^«-'«vJfc_r^>-<-o~«! 

19-  When,  and  where,  was  the  Roman  law  made  the  basis 

of  les^al  instruction  ?  /  2.  Om^-^^xZ^^^.^^  w^  "U^^^^^rf^^i^fi^  iLi>-u^ 

20-§27.  Define  the  term  "civil"  as  applied  to  Roman  law.  ^^^^  ^*^ 

21-  What  does  the  term  "civil  law/'  as  so  applied,  include? 

22-  What  was  the  canon  law?    <S<i-^a-^^<»-.-U*«i--«-  7/-^^ 

23-  Into  what  legal  system  in  modern  use  was  the  canon 

law  incorporated?   -    -~     -      V  ^-''t^.-^-^^^^v.  v 

ii  

^^  ENGLISH  COMMON  LAW 

1-^28.     What  especial  distinction  pertains  to  this  law? 

2-  From  what  did  it  arise,  upon  what  is  it  based,  and 

whence  did  it  receive  its  chief  additions  ? 

3-  What  three  principal  tribes  occupied  Britain,  and  what 

eif  ect  did  they  have  on  English  law  ? 

4-  What  kingdom  of  Britain  first  had  a  definite  legal  sys- 

tem? 

5-  Name  the  early  kings  whose  laws  were  the  chief  basis 

of  Alfred  the  Great's  codification. 

6-  What  was  the  nature  of  Alfred's  legal  work? 

7-  When  did  the  Normans  invade  England? 

8-  What  marked  effect  on  English  law  did  their  advent 

produce  ? 

9-  What  three  legal  systems  existed  in  England  at  the  be- 

ginning of  the  eleventh  century? 

10-  Who  evolved  and  established  a  single  uniform  system 

therefrom,  and  when? 


48         AMERICAN  EXTENSION  UNIVERSITY 

11-         What  was  this  compilation  thereafter  called? 
12-829.  Define  feudalism. 

13-  Outline  its  operation. 

14-  Was  it  uniform  throughout  Europe? 

15-  Did  it  ever  become  established  in  the  United  States? 
16-530.  What  was  the  status  of  the  early  English  adjective  law? 

17-  What  was  the  Constitution  of  Clarendon,  and  by  whom 

was  it  enacted  ? 

18-  What  effect  did  it  have  on  the  adjective  law? 

19-  What  decree  was  issued  by  the  Barons  in  1238,  and 

what  effect  did  it  have  on  the  law  ? 

20-  What  new  element  was  introduced  into  English  law 

by  the  statute  of  Westminster  II  ? 


Am^nran  lExtenBinn  llmwristtg 

(Non-Resident  Instruction) . 

(Cnartered    under  the  Laws  of  CaliTornia). 


Extension  Law  Course. 
Frank  C.  Smith,  LL.  B.,  Dean. 
LESSONS  2  to  9.— 

TITLE  ni.— CONTRACTS. 
By  R.  W.  Core,  A.  B.,  LL.  B.,  and  C.  H.  Sayles,  LL.  B. 
LESSON  2.— 

CHAPTER  I. 

NATURE,   KINDS   AND   REQUISITES. 

§1.  Importance  of  Subject. 

2.  Definition. 

3.  Requisites. 

4.  Kinds  of  Contracts. 

(a)  Express.  (f)   Partly   Executed    and    Partly 

(b)  Implied.  Executory. 

r«-k    n„ooi  (s)    Absolute  and  Conditional. 

{C)    yuasi.  ^^^   ^^j.^j 

(d)  Executed.  (j)   void. 

(e)  Executory.  (j)    Voidable. 

5.  The  Contractual  Obligation. 

6.  Same — Essentials  and  Sources. 

§1.  Importance  of  Subject. ^Contracts  is  the  most 
important,  as  well  as  the  most  extensive  subject  of  the 
law. J  There  is  no  relation  of  a  business  character;  no 
transaction  involving  a  duty  to  compensate  another  for 
some  benefit  received,  or  to  recompense  one  for  some  in- 
jury done, — and,  under  certain  circumstances,  permitted 
to  be  done — ^him;  no  obtaining  or  accepting  values  from 
another — except  by  his  voluntary  gift — that  does  not  act- 
ually or  impliedly,  by  intention  of  the  parties  thereto,  or 
by  operation  of  law,  constitute  a  contract  that  is  legally 
enforceable  accordingly. 

While  this  is  true,  it  is  equally  so  that  a  great  many 
transactions,  entered  into  with  great  care  and  nicety  of  ar- 
rangement, and  intended  by  the  parties  to  be  legally  bind- 
ing upon  one  another,  and  therefore  bona-fidely  understood 
by  them  to  be  legal  contracts,  are,  for  the  lack  of  some  ne- 
cessary element  or  because  of  the  introduction  of  some  fatal 


2  AMERICAN  EXTENSION  UNIVERSITY 

factor,  not  legally  contracts,  and  hence  not  enforceable  by 
law.  The  importance,  therefore,  of  a  clear  and  accurate 
knowledge  of  the  legal  responsibilities  and  duties  out  of 
which  contractual  obligations  spring,  and  by  which  they 
are  created  and  creatable,  and  of  the  legal  essentials  of  all 
valid  contracts  and  contractings  is  apparent. 

§2.  Definition. — No  difficulty  in  legal  writing  or  in 
judicial  decision,  has  been  found  greater,  by  authors  and 
judges,  than  the  framing  of  a  definition  of  the  word  Con- 
tracts which  will  meet  every  legal  essential  and  element  of 
such  undertakings,  and  express  no  less,  or  suggest  no  more, 
than  exactly  what  is  required  to  define  the  legal  requisites 
of  a  legally  binding  agreement.  However,  a  definition  of 
this  term  in  its  legal  sense,  can  convey  to  the  student 
only  an  inceptive  and  partial  knowledge  of  what  a  con- 
tract really  is,  legally,  though  stating  in  apt  phrase  its  legal 
elements.  A  clear  and  ample  understanding  of  what  a  con- 
tract is,  and  what  it  is  not,  can  be  had  only  by  a  mastery  of 
each  of  such  elements.  With  this  by  no  means  unnecessary 
preface  we  give  the  following  accepted  definition,  and  then 
separately  discuss  its  stated  parts,  viz:— /S.  contract  is  an 
agreement,  between  two  or  more  competent  parties,  for^, 
sufficient  consideration,  to  do  or  not  to  do  some  thing  that  is 
lawM.T 

§3.  Requisites  of  a  Contract. — A  critical  scrutiny  of 
the  foregoing  definition  shows  that  it  states  five  requi- 
sites of  a  legal  contract ;  that  is  to  say  that  it  consists  of  five 
essential  parts  viz: — (a)  an  agreement,  (b)  between  two  or 
more  competent  parties,  (c)  for  a  sufficient  consideration, 
(d)  to  do,  or  not  to  do  some  thing,  (e)  that  is  lawful. 

This  expresses  all  there  is  to  a  contract,  and  anything 
less  than  this — i.  e.  the  omission  of  any  one  of  these  factors 
— will  not  constitute  a  legally  valid  contract  enforceable  at 
law.  A  contract  therefore  naturally  divides  itself  into  the 
following  heads:  (1)  The  Agreement;  (2)  The  Parties;  (3) 
The  Consideration;  (4)  The  Subject  Matter;  (5)  Lawful- 
ness of  Purpose.  In  this  order  we  shall  discuss  the  whole 
body  of  contracts. 

§4.  Kinds  of  Contracts. — Contracts,  speaking  gener- 
ally, are  divisible  into  express,  implied,  and  quasi, — or  con- 


fytyY^A^OL<iiv 


DEPARTMENT  OF  LAW  3 

structive — contracts.  They,  again,  may  be  either  executed, 
executory,  partly  executed  and  partly  executory,  absolute, 
conditional,  valid,  void,  or  voidable. 

(a),  Express. — ^An  express  contract  is  one  into  which 
the  parties  have  entered  definitely  and  designedly,  either 
orally  or  in  writing,  agreeing  specifically  as  to  the  under- 
taking, and  what  share  or  part  each  shall  have  and  do 
therein. 

(b)  Implied. — An  implied  contract  is  one  where  the 
parties  have  entered  into  no  express  and  definite  agreement 
or  understanding,  but  where  their  respective  conduct  with 
reference  to  some  particular  thing,  warrants  the  conclusion 
that  their  intention  then  was  to  thereby  contract  with  one 
another.  In  an  implied  contract  the  intention  of  the  par- 
ties is  not  expressed,  but,  from  their  acts,  an  agreement  in 
fact,  which  created  an  obligation,  is  implied  or  presumed 
by  the  law.^ 

Express  and  implied  contracts  cannot  arise  out  of  the 
same  transaction.  If  parties  expressly  agree  as  to  a  cer- 
tain matter,  that  constitutes  the  contract, — granting  that  all 
the  necessary  contract  elements  are  present, — and  such 
agreement  is  an  express  contract.  If  parties  do  not  so 
agree,  the  law  upon  a  proper  state  of  facts,  raises  a  promise, 
and  that  is  an  implied  contract.  A  contract  is  either  one  or 
the  other;  it  cannot  be  both.^ 

(c)  Quasi. — Quasi  contracts,  strictly  speaking,  are  not 
contracts,  but  are  claims  arising  independently  of  any 
agreement  and  which  the  law  recognizes  as  just,  and  which 
accordingly  it  will  enforce.  They  are  created  by  law  to 
compel  fair  dealing  between  parties  where  one  endures 
some  disadvantage  by  which  another  benefits,  and  so  com- 
pels the  latter,  in  an  action  by  the  former,  to  render  him 
proper  compensation  therefor." 

(d)  Executed. — An  executed  contract  is  one  where 
the  conditions  on  both  sides  have  been  fulfilled,  and  nothing 
remains  to  be  done  under  the  contract.  A  contract  which 
is  executed  is  therefore  a  completed  contract.  It  is  per- 
formed, and  all  obligations  thereunder  are  discharged. 

(e)  Executory. — An  executory  contract  is  a  contract 

'  9  Cyc,  242.  ^Austin  Juris,  4th  Ed.,  944. 

^Walker  v.  Brown,  28  HI.,  378. 


4  AMERICAN  EXTENSION  UNIVERSITY 

wherein  that  which  is  undertaken  is  to  be  done  in  the  fu- 
ture, on  a  stated  date  or  within  a  prescribed  time.  In  such 
contracts  the  contractual  obligation  continues  obligatory 
upon  aU  parties  until  the  undertaking  is  completed. 

(f)  Partly  Executed  and  Partly  Executory. — Those 
contracts  where  one  party  has  performed  the  obligation 
thereby  imposed  upon  him,  but  something  remains  to  be 
done  by  the  other  party,  come  under  this  head.  Until  all 
the  parties  have  fulfilled  their  obligations  the  contract  is 
not  fully  executed,  and  upon  those  who  have  yet  some  re- 
quirements to  meet,  the  obligation  abides  until  full  perform- 
ance is  made. 

(g)  Absolute  and  Conditional. — A  contract,  the  obli- 
gation of  which  is  not  dependent  upon,  or  determined  by, 
the  happening  or  not  happening  of  any  stated  event,  but 
which  goes  into  effect  immediately,  is  called  an  absolute 
contract. 

Conditional  contracts  are  the  antithesis  of  absolute 
contracts,  and  their  binding  force  and  effect  is  dependent 
upon  the  occurence  or  non-occurence  of  some  stated  hap- 
pening. 

(h)  Valid. — ^A  valid  contract  is,  of  course,  one  where- 
in all  the  essentials  prescribed  by  the  law,  as  to  parties,  con- 
sideration, legality  of  subject  matter  and  of  purpose,  are 
fully  met. 

(i)  Void. — ^Void  contracts  are  those  which  lack  some 
one  or  more  of  the  legal  requisites  of  valid  contracts.  In 
such  cases  there  is  really  no  contract  at  all  and  hence  the 
com'ts  will  give  them  no  judicial  recognition,  except  to  re- 
fuse enforcement  under  all  circumstances.  Illegal  con- 
tracts are  always  void. 

(j)  Voidable. — Contracts  which,  while  complying 
fully  with  the  requirements,  of  the  law  as  to  substance 
have  an  element  therein  giving  legal  grounds  for  avoiding 
it,  at  the  option  of  one  or  more  of  the  parties  thereto,  are 
voidable.  Or  they  may  be  defined  as  contracts  that  may  be 
legally  binding,  but  yet  are  capable  of  being  affirmed  or  re- 
pudiated at  the  will  of  a  party  thereto. 

Contracts  of  minors,  and  those  obtained  by  fraud,  du- 
ress and  undue  influence,  are  familiar  illustrations  of  this 
class.    In  such  cases  the  minor  after  he  reaches  his  major- 


DEPARTMENT  OF  LAW  5 

ity,  and  the  injured  party  when  the  fraud  is  discovered,  or 
the  duress  or  undue  influence  is  removed,  may  either  re- 
pudiate the  contract  for  the  cause  given,  and  have  it  de- 
clared void  for  that  reason,  or  may  ratify  and  affirm  it,  and 
be  bound  thereto,  if  in  other  respects  it  is  wholly  within 
the  law. 

§5.  The  Contractual  Obligation.-/The  obligation  of 
a  contract  is  the  legal  binding  force  of  the  contract. ;  That 
is  to  say  that  which  makes  an  agreement  legally  binding, 
which  gives  the  right  to  a  party  thereto  to  bring  suit  for  a 
breach  thereof, — that  which  forms  the  legal  tie  by  which 
one  is  bound  to  do,  or  not  to  do,  some  act,  to,  for,  or  on  be- 
half of  another — is  the  obligation  of  the  contract. 

This  obligation  pertains  to  and  binds  only  those  who 
are  parties  to  the  contract,  either  as  the  direct  participants 
therein  or,  under  certain  circumstances  to  be  noted  later, 
beneficiaries  thereunder,  and  it  can  be  taken  advantage  of 
only  by  such  parties.  Contract  obligations  and  contrac- 
tual relations  are  legally  created  only  by  a  legal  agreement 
between  parties,  are  obligatory  only  upon  such  parties,  and 
can  be  enforced  only  by  them,  or  by  those  in  whose  behalf 
upon  a  sufficient  consideration  they  are  made. 

§6.  Same — Essentials  and  Sources. — In  order  that  an 
obligation  may  be  enforceable  at  law  it  must  relate  to  defi- 
nite acts  or  forbearances.  { If  an  agreement  be  so  indefinite 
that  no  one  can  say  what  was  agreed  upon,  a  court  cannot 
enforce  it.  Such  an  agreement  cannot  create  any  legal  ob- 
ligation and  hence  cannot  give  rise  to  a  contract.': 

The  obligation  must  be  reducible  to  a  money  value. 
This  is  necessary  to  distinguish  an  agreement  affecting  le- 
gal relations  from  that  which  affects  only  social  relations, 
aSleourts  can  deal  only^  with  matters  whereby  a  legal  rela- 
tion is  to  be  effected.  fWe  may  therefore  say,  generally,  of 
the  legal  obligation  that  it  is  a  control,  between  definite  par- 
ties, oyer  certain  acts,  which  are  reducible  to  a  money  value. 
.The  first  and  most  direct  source  of  legal  obligations  is 
that  of  an  agreement.  The  obligation  results  from  the  ac- 
ceptance by  one  party  of  the  offer  of  another,  and  this  is  the 
legal  tie  binding  both  parties  to  the  fulfillment  of  their 
agreement.  It  may  also  arise  from  tort, — that  is,  where  a 
private  right  of  person  or  of  property  has  been  violated  by 


6  AMERICAN  EXTENSION  UNIVERSITY 

trespass,  assault  or  in  some  other  manner.  In  such  cases 
the  wrong  doer  is  legally  bound  to  pay  for  the  damage  he  has 
caused,  but  the  obligation  is  not  created  by  an  agreement 
of  the  parties,  but  springs  from  the  wrongful  act  itself. 

Obligaticin  may  also  arise  from  breach  of  contract. 
Where  for  instance  A  is  under  promise,  given  for  a  consider- 
ation, to  B,  to  do  certain  acts,  and  breaks  his  promise,  a 
right  of  action  arises  to  favor  B.  This  obligation  depends 
upon  an  agreement  that  has  been  violated,  but  does  not 
spring  from  the  agreement  itself.  Obligations  also  arise 
from  what  are  known  as  quasi  contractual  relations,  the 
characteristics  of  which  have"alreadyi>'(6en  defined,  and  the 
obligation  of  which,  it  will  be  remembered,  is  imposed  hy 
the  law,  and  does  not  spring  from  the  consent  of  the  party 
charged. 

CHAPTER  II. 

COMPETENCY  OF  PARTIES. 

§7.     Who  may  Contract. 
S.     Limitations  upon  Right  to  Contract. 

(a)  Generally 

(b)  Aliens 

(c)  Convicts 

(d)  Drunkards 

(e)  Infants  or  Minors 

(f)  Insane  Persons 

(g)  Married  Women 
(h)  Spendthrifts 

§7.  Who  May  Contract. — All  natural  born  persons  of 
legal  age,  sound  mind,  and  not  under  soiherorm  oflimita- 
tion  or  disablirty  to  contract,  prescribed  by  law,  arc;  (capable 
of  making  T'alid  contracts.  The  legal  presumption  is  in  fa- 
vor of  one's  ability  to  contract.  Anyone,  therefore,  who 
alleges  another's  legal  incapacity  so  to  do  has  the  burden  of 
proof  on  him  to  show  such  incapacity. 

Corporations,  duly  organized  may  make  valid  contracts 
upon  matters  within  the  scope  of  their  corporate  authority 
as  fixed  by  their  charters,  or  articles  of  corporation. 

§8.    Limitations  Upon  Right  to  Contract. — (a)  G-ener- 

ally. — Certain  persons  are,  for  various  reasons,  incapacitat- 
ed in  whole  or  in  part  by  law  from  entering  into  contracts. 
To  some  the  contractual    right  is  denied    in  toto ;  to  others 


DEPARTMENT  OF  LAW  7 

partially,  either  for  a  certain  period  of  time,  or  during  the 
existence  of  a  certain  legal  relation,  or  legal  condition,  or  as 
regards  certain  subject  matter  of  contracts,  and  the  like. 
The  principal  classes  thus  restricted  are,  aliens,  convicts, 
drunkards,  infants  or  minors,  insane  persons,  married  wo- 
men and  spendthrifts. 

There  are  others  upon  whose  right  to  contract,  under 
certain  conditions  the  law  lays  limitations,  but  these  are 
those  who  act  in  a  representative  or  fiduciary  capacity  under 
certain  authority  or  legal  sanction  given  them,  such  as 
agents,  partners,  public  and  corporate  officers,  and  trus- 
tees, and  whose  contracts  made  by  them  as  such  personages, 
must  be  wholly  within  the  authority  under  which  they  act, 
in  order  to  be  upheld.  Such  limitations  will  be  fully  pre- 
sented in  the  lessons  covering  such  subjects. 

(b).  Aliens. — An  alien  is  a  foreign-born  resident  in  a 
country  in  which  he  does  not  possess  the  rights  of  a  citizen; 
i.  e.  he  is  a  foreigner.  Originally  aliens  were  not  granted 
any  legal  rights  of  property  or  contract  beyond  the  merest 
fraction  sufficient  to  enable  them  to  provide  for  their  im- 
mediate necessities  and  comforts  and  to  accumulate  an  un- 
consequential  amount  of  personal  goods.  This  has  become 
so  far  changed  in  recent  years,  especially  in  this  countr}^, 
that  in  times  of  peace  with  an  alien's  government,  he  has 
now  full  power  to  contract  and  to  invoke  the  law  of  the  land 
to  enforce  his  rights  thereunder.  In  case  of  war,  the  citi- 
zens of  the  enemy-country,  resident  here,  are  impressed  with 
the  enemy  character,  and  technically,  the  legal  rights  enjoy- 
ed by  them  in  times  of  peace  between  the  countries,  are  de- 
nied them  during  hostilities.  ^  Actually,  however,  unless 
such  an  alien  is  actively  belligerent,  the  technical  rule  is  not 
actively  enforced. 

Aliens  cannot  procure  title  to  public  lands  directly 
from  the  government,  and  in  some  states  are  restricted  in 
the  right  to  acquire  real  estate  by  purchase,  or  to  hold  it  be- 
yond a  prescribed  time  if  it  is  inherited  by  them.  Naturali- 
zation of  course  carries  with  it  full  citizenship  rights. 

(c)  Convicts.— fin  the  olden  days  one  convicted  of  fel- 
ony was  deemed  and  was  in  fact  out  of  the  law,  and  hence 
became  known  as  and  was  called  an  outlaw.^   As  such  he 

'  De  Jarnett  v.  De  Guerville,  36  Mo.,  440. 


8  AMERICAN  EXTENSION  UNIVERSITY 

was  denied  the  right  to  possess  property,  make  contracts, 
sue  and  be  sued,  and  many  other  legal  benefits.  Today  in 
some  jurisdictions  substantial  remnants  of  these  old  severi- 
ties remain;  but,  generally,  conviction  for  crime  does  not 
now  forfeit  any  property  or  legal  rights  beyond  those  per- 
taining to  the  functions  of  citizenship.  In  most  states, 
probably  in  all,  therefore,  a  convict  of  legal  age  and  other- 
wise capable,  has  full  legal  right  to  make  most  contracts,  and 
to  appeal  to  the  courts  to  enforce,  or  defend  against,  them. 

(d)  Drunkards. — Persons  so  completely  under  the  in- 
fluence of  intoxicating  liquor  or  drugs  as  not  to  be  able  to  in- 
telligently comprehend  what  they  are  doing  at  the  time  they 
entered  into  a  contract  are  deemed  not  to  have  then  possess- 
ed the  necessary  quality  of. discretion  or  understanding  to 
make  a  wholly  valid  agreement.  They  can  then  defeat  the 
enforcement  of  a  contract  so  made,  by  pleading  such  incom- 
petency.^ Contracts  so  made  are  merely  voidable  not  void. 
Persons  thus  entering  into  such  engagements  may  there- 
fore upon  recovering  their  normal  sense,  elect  to  affirm  or  to 
disaffirm  them. 

(e)  Infants,  or  Minors. — Persons  under  twenty-one 
years  of  age,  but  in  some  states,  women  under  eighteen 
years  of  age  are  legally  infants  or  minors.  Except  within 
a  very  narrow  limit,  closely  guarded  by  the  law,  infants 
have  no  right  of  contract.  There  are,  however,  certain  con- 
tractual obligations  imposed  by  law  upon,  or  deliberately 
entered  into  by,  them  to  which  the  law  under  proper  cir- 
cumstances, gives  full  recognition  and  enforcement. 

Speaking  generally,  it  may  be  said  that  the  contracts 
of  infants  for  necessities,  such  as  food,  clothing,  lodging, 
medical  attention,  school  and  the  like  to  a  reasonable  value 
thereof,  furnished  him  at  his  request  are  valid  and  binding 
upon  him.^  The  test  in  such  cases,  is:-^Were  the  goods 
contracted  for,  necessaries'?  If  so,  he  is  bound  therefor;  oth- 
erwise, if  they  were  not.^  Articles  of  ornament,  pleasure  or 
luxury  merely,  are  not  necessities ;  those  for  use  for  his  per- 
sonal needs,  not  otherwise  supplied,  and  of  a  grade  to  meet 
his  station  in  life,  and  furnished  him  when  he  is  not  living 

•Bates  V.  Ball,  72  111.,  108;  Foote  v.  Park  Co.,  127  Iowa,  131;   Mlddle- 

Tewksbury,  21  Vroom  97.  bury  College  v.  Chandler,    16    Vt., 

•Gay  V.  Ballam,  4  Wench  403;  Earle  686. 
T.  Reed,  10   Met..   387;    Wallin   v. 


DEPARTMENT  OF  LAW  9 

with  and  is  not  supported  by  his  father  are.^  An  infant  is 
not  liable  for  money  borrowed  even  though  he  says  to  the 
lender  that  it  is  required  for  necessaries,  unless  the  latter 
makes  certain  that  it  is  so  expended.  Nor  can  he  be  held  to 
pay  more  than  the  reasonable  value  of  necessaries  furnished 
him  even  though  he  expressly  agreed  to  pay  a  higher  price, 
and  even  gives  his  promissory  note  therefor.  ^ 

Where  an  infant  is  liable  on  some  tort  committed  by 
him — some  injury  of  a  civil  character  done  to  another — ^he 
will  be  held  liable  on  any  contract  he  enters  into  in  settle- 
ment of  his  wrong.®  So,  too,  all  contracts  imposed  upon 
him  by  operation  of  law,  all  quasi  contracts{^hat  is  to  say 
which  his  actions  and  dealings  create  by  the  law's  interpre- 
tation thereof,)and  all  contracts  which  by  statute  he  is  au- 
thorized to  make,  will  be  held  fully  binding  upon  him  by  the 
courts. 

The  modern  rule  concerning  an  infant's  contracts,  other 
than  those  that  are  held  fully  valid  as  above  set  forth,  is  that 
they  are  voidable  by  him.  That  is  to  say  he  has  the  privi- 
lege of  repudiating  them  if  he  wishes  to  do  so,  and  if  he  does 
not  do  this,  they  are  binding  upon  him.  The  other  party  to 
the  agreement  however,  if  he  be  of  full  age,  is  legally  held 
thereto  unless  the  minor  disavows.  In  other  words  a  party 
of  legal  age  cannot,  on  the  ground  that  the  other  party  to  a 
contract  is  a  minor,  disaffirm  such  contract;  whereas  the 
minor,  can.  This  he  may  do  at  any  time  during  his  minor- 
ij;y,  or  within  a  reasonable  time  after  attaining  legal  age."^ 
'And  the  fact  that  he  secured  the  contract  by  falsely  claiming 
that  he  was  of  age,  does  not  effect  his  right^J  Ratification 
or  repudiation  may  be  either  expressly  made,  or  shown  by 
the  infant's  actions. 

(f )  Insane  Persons. — As  in  the  case  of  infants  the 
contracts  of  persons  of  unsound  mind,  created  by  law  and 
those  for  necessaries  for  himself  and  his  family  if  he  has  one, 
are  held  valid  ;^  to  the  extent  at  least  as  in  the  case  of  infants 
that  he  must  pay  a  reasonable  price  therefor,  but  not  neces- 
sarily the  contract  price  if  it  be  exhorbitant. 

*  Clark  on  Contracts,  231;   Benjamin  '  Bradford  v.  French,  119  Mass.,  366; 

on  Contracts,  152;  Lynch  v.  John-  Studwell  v.  Shopter,  54  N.  J.,  252. 

son,  109  Mich.,  640.  "Studwell  v.  Shopter,  Supra. 

•Locke  V.  Smith,  41  N.  H.,  346.  » Sceva  v.  True,  53  N.  H.,  627; 
•Ray  V.  Tubbs,  50  Vt.,  688;   Stowers  Reando  v.  Misplay,  90  Mo.,  251. 

V.  Hollls,  83  Ky.,  544.  "  Ducher  v.  Whitson,  112. 


10         AMERICAN  EXTENSION  UNIVERSITY 

Persons  who  have  been  judicially  adjudged  insane  can- 
not themselves,  make  a  valid  contract.  Their  conservator 
or  guardian  must  do  this  for  them.  The  contracts  of  others 
of  unsound  mind  are  merely  voidable,  at  their  option  if  the 
unsoundness  was  only  temporary  at  the  time  the  contract 
was  made;  or  at  the  option  of  the  person  legally  qualified  to 
choose  for  them,  if  their  mental  unbalance  is  chronic. ^*^ 

Where,  however  a  party  of  sound  mind  acts  in  entire 
good  faith  in  a  transaction,  and  in  ignorance  of  the  insanity 
of  the  other,  and  no  unfair  advantage  is  taken  of  the  latter, 
the  latter  can  repudiate  the  contract  later,  only  when  by  so 
doing  the  othe^  party  will  not  be  injured  thereby.  ^^ 

The  basis  of  the  rule  pronouncing  contracts  of  persons 
of  unsound  mind  void,  or  voidable,  as  the  circumstances 
stated  warrant,  is  that,  as  we  have  already  seen,  the  minds 
of  parties  must  intelligently  meet  in  order  to  create  a  valid 
legal  obligation,  and  because  insane  persons  are  incapable 
of  understanding  the  nature  of  their  acts,  and  have  not  a  le- 
gal contracting  mind. 

(g)  Married  Women. — Until  within  comparatively  re- 
cent years,  when,  by  statute,  married  women,  in  this  coun- 
try particularly,  have  been  given  practically  all  the  legal 
rights  of  property  and  of  contract,  which  they  had  as  single 
women,  a  married  woman  could  make  no  contract  binding 
upon  herself  or  her  estate.  In  fact,  under  the  common  law, 
a  woman,  upon  her  marriage,  legally  lost  her  identity,  her 
personal  property  passed  to  the  ownership  and  possession 
of  her  husband,  she  could  enter  into  no  contractual  rela- 
tions, her  inheritances,  and  her  earnings  after  marriage,  be- 
longed to  him,  and  even  real  estate  held  by  her  before  mar- 
riage was  burdened  with  rights  of  the  husband  that  render- 
ed her  practically  only  the  holder  of  the  title  thereof. 

Today,  however,  she  has  almost  unlimited  right  of  con- 
tract and  of  ownership  and  possession  of  real  and  personal 
property.  Such  limitations  as  yet  remain  upon  such  rights 
will  be  treated  under  the  respective  subjects  where  they 
exist. 

(h)  Spendthrifts. — Improvident  persons  who  waste 
their  substance  by  unprofitable  spending,  may,  in  most 
states,  by  judicial  proceedings,  be  adjudged  incapable  of 

"  Molton  V.  Camroux,  2  Exch.,  489. 


DEPARTMENT  OF  LAW  11 

conducting  their  affairs  on  that  account.  Such  persons, 
known  as  spendthrifts,  while  undoubtedly  not  of  full  sound 
mental  caliber,  yet  are  not  in  that  mental  condition  war- 
ranting their  adjudication  as  insane  persons,  and  so  cannot 
be  rightly  so  treated.  To  conserve  their  property  in  the  in- 
terest of  themselves  and  of  those  dependent  upon  them,  and 
thus  avoid  the  possibility  of  all  or  some  of  them  becoming 
public  charges,  the  law^  provides  for  the  appointment  by  le- 
gal action,  of  conservators  for  such  incapables.  When  this 
is  done,  their  contracts  are  no  longer  unquestionably  valid, 
but  become  voidable  under  proper  circumstances. 


QUIZZEE. 

XATURE,  KINDS  AND  REQUISITES. 

1-§1.    What  is  the  relative  importance  of  the  subject  of 
contracts,    as  to  the  general    bodv  of   the  law — 
state  fully? 
2-         What  is  the  importance  of  an  accurate  knowledge 

of  the  law^  of  contracts  in  business  matters  ? 
3-§2.    Define  a  contract? 

4- §3.     State  the  five  requisites  of  a  legal  contract. 
5-§4.    Into  what  classes  are  contracts  generally  divisible  ? 
6- (a)     Define  an  express  contract. 
7-(b)    What  is  an  implied  contract? 
8-         Can  an  express  and  an  implied  contract  arise  out  of 

the  same  transaction — and  why? 
9-(c)    What  can  you  say  concerning  quasi  contracts? 
10-         How  are  they  created  and  for  what  reason? 
11- (d)    What  is  an  executed  contract? 
12- (e)     Define  fully  an  executory  contract. 
13-        In  such  contracts  when  does  the  contractual  obli- 
gation terminate  ? 
14- (f)     What  are  partly    executed    and  partly    executory 

contracts  ? 
15- (g)    Define  an  absolute  contract. 
16-         Define  a  conditional  contract. 
17- (h)    What  is  a  valid  contract. 
18- (i)     Define  void  contracts. 
19-         How  do  courts  regard  void  contracts? 
20- (j)    What  is  a  voidable  contract? 


12         AMEEICAN  EXTENSION  UNIVERSITY 

21-  What  is  the  distinctive  characteristic  of  a  voidable 

contract ? 

22-  Name  some  common  forms  of  voidable  contracts,  and 

state  how  they  can  be  validated,  or  be  made  void. 
23-§5.    "What  is  the  obligation  of  a  contract? 

24-  Upon  whom  is  the  contractual  obligation  binding'? 

25-  How  are  contract  obligations  created,  and  by  whom 

can  they  be  enforced  *? 
26-§6.    What  is  essential  in  order  to  render  a  contract  ob- 
ligation legally  enf orcable  ? 

27-  How  does  indefiniteness  of  a  contract  affect  the  legal 

remedy  thereon? 

28-  To  what  basis  of  value  must  contractual  obligations 

be  reducible  ? 

29-  With  what  relations  only  do  courts  deal? 

30-  What  is  the  primal  source  of  legal  obligations  ? 

31-  How  otherwise,  than  from  contracts,  can  legal  obli- 

gations arise? 

32-  In  such  cases  from  what  does  the  obligation  spring? 

33-  Can  an  obligation  spring  from  a  breach  of  contract? 

34-  Can  a  legal  obligation  arise  from  a  quasi  contractual 

relation? 


COMPETENCY  OP  PARTIES. 

l-§7.    Who  may  legally  make  contracts? 

2-  What  presumption  pertains    as  to  one's    ability  to 

contract  ? 

3-  Upon  whom  is  the  burden  of  proof  where  incapacity 

to  contract  is  alleged? 

4-  May  corporations  contract,  and  what  limitation,  if 

any,  is  there  to  their  right  so  to  do  ? 
5- (a)  §8.  What  can  you  say  as  to  the  limitation  upon  cer- 
tain persons,  of  the  contractual  right? 

6-  Name  the  principal  classes  of  persons  thus  re- 

stricted? 

7-  Upon  what  other  persons,  and  for  what  reason, 

are  there  restrictions  placed  upon  their  contract 

right? 
8-(b)    Define  an  alien. 
9-         What  legal  rights  did  aliens  originally  have,  and  to 

what  extent  have  such  rights  been  enlarged? 
10-         When  is  an  alien's  right  under  the  law  suspended? 


DEPARTMENT  OF  LAW.  13 

11.  Can  aliens  procure  title  to  public  land — if  so,  how? 
12-  How  does  naturalization  affect  an  alien's  rights'? 

13- (c)  What  was  the  old  rule  concerning  the  legal  rights  of 
convicts^state  fully? 

14-  What  mitigation  of  the  old  law  now  exists  ? 

15-  Can  a  convict  now  legally  make  contracts'? 

16-  Have  convicts  a  legal  standing  in  the  courts'? 

17- (d)     What  extent  of  intoxication  will  legally  incapaci- 
tate one  from  making  a  contract — and  why? 

18-  How  can  one  thus  incapacitated  defeat  the  enforce- 

ment of  a  contract  thus  made? 

19-  Are  such  contracts  void  or  voidable  ? 
20- (e)     Define  infants,  or  minors. 

21-  What  rights  of  contract  have  infants? 

22-  Are  the  contracts    of  infants    ever    binding  upon 

them? 

23-  Can  you  name    any  contracts  of  an    infant  legally 

binding  upon  him? 

24-  What  is  the  test  by  which  a  contract  will    or 

will  not  be  held  so  binding? 

25-  Is  an  infant  legally  bound  upon  contracts  merely  of 

luxury  or  pleasure  ? 

26-  Are  infants  bound  on  contracts  for  borrowed  money 

— if  so,  when? 

27-  What  is  the  limit  of  value  for  articles  furnished 

him  to  which  an  infant  can  be  legally  held? 

28-  Is  an  infant  liable  for  his  torts  ? 

29-  What  can  you  say  as  to  an  infant's  liabilities,  on 

quasi  contracts  ? 

30-  When,  and  when    not,  are  contracts    not  otherwise 

binding  upon  him,  made  legally  binding? 

31-  Is  the  other  party  to  a  contract  with  a  minor,  if  of 

legal  age,  bound  thereto  ? 

32-  Can  one,  legally  competent,  avoid  a  contract  simply 

on  the  ground  that  the  other  party  is  a  minor? 

33-  How  can  a  minor's  ratification  or  repudiation  of  a 

voidable  contract  be  shown? 
34- (f)     What  can    you  say  as    to  the  legality    of  contracts 
made  by  persons  of  unsound  mind? 

35-  Can  persons  judicially  adjudged  insane  make  valid 

contracts? 

36-  Who  can  legally  make  contracts  for  such  persons  ? 


14         AMERICAN  EXTENSION  UNIVERSITY 

37-  What  is  the  nature  of  contracts  made  by  others  of 

unsound  mind'? 

38-  What  limitation,  if  any,  is  placed  upon  the  rights  of 

such  persons  to  repudiate  their  contracts  1 

39-  What  is  the  basis  of  the  rule  pronouncing  contracts 

of  such  persons  void  or  voidable  ? 
40- (g)    What,  under  the  old  law,  was  the  status  of  married 

women    with    reference    to    their    contractual 

rights  ? 

41-         State  the  common  law  status  of  married  women  with 

reference  to  their  personal  and  real  property, 

their  inheritances,  and  earnings  after  marriage. 

^-         What  are    the    present    legal    rights    of    married 

women? 
43- (h)     What  can  you  say  as  to  the  limitations  of  the  right 

of  a  spendthrift  to  contract  ■? 

44-  How  can  their  rights  be  legally  abridged? 

45-  When  do  a  spendthrift 's  contracts  become  voidable  f 


DEPARTMENT  OF  LAW  15 

LESSON  3.— 

CHAPTER  m. 

CONSIDERATION. 

§9.   Definition  and  Essentials. 

10.  Consideration  in    Sealed    Contracts. 

11.  Necessity  of  Consideration. 

12.  Value  and  Adequacy. 

13.  Kinds  of  Consideration. 

14.  Past  Consideration. 

15.  Same — Exceptions  to   General   Rule. 

16.  Barred  Debt  as  Consideration. 

17.  Forbearance  as  Consideration. 

18.  Compromise  as  Consideration. 

19.  Existing  Legal  Obligations  as  Consideration. 

20.  Composition  with  Creditors. 

21.  Moral    Obligation    as    Consideration. 

22.  Mutual   Promises   as   Consideration.  , 

23.  Unreal  Consideration. 

24.  Impossible  Consideration. 

25.  Failure  of  Consideration. 

§9.  Definition  and  Essentials.— In  the  lesson  on  Offer 
and  Acceptance  we  shall  consider  the  method  by  which  the 
common  intention  of  contracting  parties  is  to  be  reached  so 
as  to  form  a  legal  contract.  But  it  is  not  sufficient  that  such 
common  intention  merely  refer  to  legal  consequences  and  be 
reached  as  in  the  simple  manner  there  set  forth.  There 
must  be  further  evidence  of  the  intention  of  the  parties 
to  contract,  an  additional  and  essential  factor,  in  th^  ab- 
sence of  which  no  legal  obligation  will  be  created.  (  This 
essential  is  the  consideration  of  the  contract  and  is  the 
legal  basis  on  which  every  simple  contract  must  rest. 
Without  the  factor  of  a  consideration  there  cannot  be  a 
legal  binding  contract. 

Consideration  is  the  thing  of  value  rendered  by  one  to 
another  at  his  request,  express  or  implied,  in  return  for 
some  thing  of  value  rendered  him,  and  mutually  agreed 
upon  as  the  basis  of  their  respective  undertakings. 

Clark  on  Contracts  says  "Consideration  means  that_ 
which  moves  from  the  promisee  to  the  proinisor  at  the  lat- 
ter^s  request  in  return  for  his  promise. ' '  Knowlton  defines 
consideration  as  "A  legal  benefit  to  the  promisor,  or  a 
legal  detriment  to  the  promisee,"  and  this  is  correct. 
(Money,  or  money ^s  worth  is  a  common  form  of  consid- 
eration; so,  too,  are  work  and  laborT^,  However,  consider- 


16         AMERICAN  EXTENSION  UNIVERSITY 

ation  may  consist  in  **some  right,  interest,  profit,  or  benefit 
accruing  to  one  party,  or  some  forbearance,  detriment, 
loss  or  responsibility  given,  suffered  or  undertaken  by  the 
other. '  '^  '*Xt  is  essential  that  the  benefit  to  be  conferred,  or 
the  detriment  to  be  suffered,  be  something  of  value  in  the 
eye  of  the  law.  A  court  will  insist  upon  this  although  it  will 
not  inquire  into  the  adequacy  of  the  consideration.  Fur- 
thermore the  consideration  must  be  legal,  /^his  means  in 
general,  that  it  must  not  violate  any  statute,  the  common 
law,  or  public  policy.  It  must  be  either  present  or  future, 
but  must  not  be  pasTf  since  a  promise  to  be  binding  must 
be  made  in  contemplation  of  a  present  or  future  benefit. 
"We  will  consider  these  essentials  of  consideration  in 
their  order. 

§10.  Consideration  in  Sealed  Contracts. — ^As  we  shall 
learn  in  an  early  lesson  the  placing  of  a  seal  on  an  agree- 
ment makes  the  agreement  one  of  especially  high  legal 
character  and  importance.  The  act  of  placing  a  seal  im- 
poses upon  the  transaction  a  legal  solemnity  and  dignity 
which  thereby  raises  the  contracts  by  which  they  are  wit- 
nessed, into  a  class  by  themselves. 

The  principal  practical  legal  benefit  attached  to  sealed 
instruments  is  that  the  seal  thereon  attests,  or  rather  raises 
the  conclusive  legal  presumption  of,  a  consideration.  In- 
deed, the  legal  fact  is  that  a  contract  under  seal  does  not 
require  an  actual  consideration  to  support  it.^  The  seal  of 
itself,  imports  a  consideration,  and  the  parties  thereto  are 
estopped  to  deny  it.^  Consequently  a  sealed  contract  is 
legally  binding  and  can  be  legally  enforced  not  only  if  no 
consideration  is  stated  therein,  but  if  in  fact  there  was  no 
consideration  therefor.  , 

§11.  Necessity  of  Consideration.-^A  consideration  is 
necessary  to  the  validity  of  every  contract.  A  mere  naked 
promise  to  do  a  thing  unsupported  by  a  consideration  there- 
for, moving  from  the  promisee,  is  not  legally  binding  on  the 
promisor  and  is  not  enforceable  in  the  courts.*  A  leading 
case  on  this  principle  is  that  of  Rann  v.  Hughes.  ^    John 

*Currie  v.  Miss.  L.  R.,  10  Exch.,  162.  87. 

*Gooch     V.     Goodman,      2      Queen's  *  Weaver  v.  Fries,  85,  111.,  356;  Litz. 

Bench,580.  v.  Goosling,  93  Ky.,  185. 

•Van  Valkenburgh  v.  Smith,  60  Me.,  »  7  T.  R.,  350. 


DEPARTMENT  OF  LAW  17 

and  Mary  Hughes  owned  property  which  they  wished  to  di- 
vide. The  property  being  difficult  of  division,  it  was  agreed 
that  John  should  take  the  larger  share  and  pay  Mary  $5000 
to  equalize  the  dilference.  Before  this  payment  was  made 
John  died  and  his  executrix,  who  was  the  defendant  in 
the  case,  promised  to  pay  the  money  out  of  her  own  estate. 
This  promise  was  made  to  the  plaintiff  Rann  as  executor  of 
the  estate  of  Mary  Hughes.  When  Rann  brought  suit  to 
enforce  this  promise  the  court  held  that  though  the  promise 
was  made  in  writing  no  consideration  appeared  for  it  and 
therefore  the  promise  was  void. 

§12.  Value  and  Adequacy. — The  consideration  must 
be  of  value.  The  adequacy,  thereof,  however,  is  a  matter 
into^wETch  the  courts  will  not  inquire.  The  law  insists  that 
there  be  some  consideration,  but  goes  no  further  on  that 
point.  If  a  man  gets  what  he  bargains  for  the  law  will 
not  inquire  into  its  value,  or  whether  its  value  is  equal  to 
what,  or  less  or  greater  than,  he  gave  for  it,  as  that  would 
be  ''the  law  making  the  bargain  instead  of  leaving  the  par- 
ties to  make  it. ' '  ^^he  law  will  be  satisfied  if  something  is 
done,  or  promised,  by  the  promisee,  as  consideration  for 
the  promise  made,  or  for  the  thing  delivered  to  him)  A 
promise  to  pay  $5000  if  the  promisee  would  refrain  from  the 
use  of  tobacco  and  liquor  until  he  reached  the  age  of 
twenty-one,  has  been  held  to  be  based  upon  sufficient  con- 
sideration, namely,  the  forbearance  by  the  promisee  from 
the  legal  right  to  do  these  things  if  he  wished.  ^.  A  promise 
to  pay  $500  if  the  promisee  would  attend  the  promisor's 
funeral,  has  also  been  held  enforceable."^ 

In  Bainbridge  vs.  Eirmstone,,^  B  gave  permission  to 
F  to  weigh  two  boilers  which  F  promised  to  return  in  the 
condition  in  which  he  found,  them.  He  took  the  boilers  to 
pieces  to  weigh  them  and  then  refused  to  put  them  together 
again;  whereupon  B  brought  suit.  It  was  argued  that  the 
weighing  of  the  boilers  was  neither  a  detriment  to  the  plain- 
tiff nor  a  benefit  to  the  defendant,  and  consequently  that 
there  was  no  consideration  to  support  F's  promise.  The 
court  overruled  this  argument  and  in  deciding  in  favor  of 
B  said:    ''The  defendant  had  some  reason  for  wishing  to 

•Hamer  v.  Sidway,  124  N.  Y.,  530.  » A.  &  E.,  I4S. 

'Earle  v.  Angell,  57  Mass.,  294. 


18         AMERICAN  EXTENSION  UNIVERSITY 

weigh  the  boilers,  and  he  could  do  so  only  by  obtaining  per- 
mission from  the  plaintiff,  which  permission  he  did  obtain 
by  promising  to  return  them  in  good  condition.  We  need 
not  inquire  what  benefit  he  expected  to  derive."  In  Wol- 
f  ord  vs.  Powers,  ^  an  action  was  brought  on  a  note  given  as 
consideration  for  a  parent  naming  his  child  after  the 
maker  of  the  note.  The  court  held  that  the  promise  was 
based  upon  a  sufficient  consideration  inasmuch  as  the 
parent  gave  up  his  right  to  name  the  child. 

In  courts  of  equity,  however,  an  apparent  exception  to 
the  foregoing  principle  appears  in  cases  where  the  consid- 
eration is  so  grossly  inadequate  as  to  furnish  evidence  of 
fraud,  or  imposition  in  the  transaction.  In  such  cases  equity 
will  grant  relief  to  the  injured  party  but  it  is  the  fraud, 
and  not  the  inadequacy  of  consideration,  in  the  matter  which 
vitiates  the  contract.  ^^ 

§13.  Kinds  of  Consideration. — There  are  two  kinds  of 
consideration — good  and  valuable.  Good  consideration  mfay 
be  based  upon  good  will,  friendship,  relationship,  and  the 
like.  Valuable  consideration,  is  money  or  money's  worth; 
that  is  to  say,  is  cash,  or  its  equivalent,  such  as  goods,  prop- 
erty, labor  or  the  fruit  of  labor. 

The  consideration  for  a  promise  may  be  an  act,  a  for- 
bearance, or  a  promise  to  act  or  forbear.  When  a  promise 
constitutes  the  consideration  for  another  promise,  the  con- 
tract is  said  to  be  upon  an  executory  consideration.  An 
illustration  of  this  is  that  ofmutual  promises  to  marry. 
/A  promise  is  a  good  consideration  for  a  promise,)  and  the 
principles  stated  regarding  the  consideration  in  general, 
will  apply  to  an  executory  consideration.  Such  mutual 
promises  must  be  simultaneous  and  they  are  governed  by 
the  rules  of  offer  and  acceptance.  ^  '  ;" 

A  consideration  is  said  to  be  executed  when  one  of  the 
parties  has,  in  either  the  act  that  constitutes  the  offer  or  the 
acceptance,  done  all  that  the  contract  requires  him  to  do, 
and  the  further  performance  of  the  contract  is  left  to  the 
other  party  only.  Leake  on  Contracts  describes  this  as  the 
"acceptance  of  an  executed  consideration"  and  as  "a  con- 
sideration executed  upon  request."    These  forms  of  consid- 

•  85  Ind.,  294.  S.,  45;  Hough  v.  Hunt,  2  Ohio,  295. 

"Randolph  v.   Quiduich   Co.,   135   U. 


DEPARTMENT  OP  LAW  19 

eration  were  spoken  of  under  Offer  and  Acceptance  as  the 
offer  of  an  act  for  a  promise,  and  the  offer  of  a  promsie  for 
an  act.  The  acceptance  of  an  executed  consideration  is  well 
illustrated  by  a  delivery  of  goods,  or  the  doing  of  services 
under  such  circumstances  that  a  promise  to  pay  therefor  is 
created  by  an  acceptance  thereof.  In  such  a  case  the 
offeror  has  done  his  part  as  soon  as  he  becomes  a  party  to 
the  contract,  while  the  offeree  or  acceptor  has  his  part  of 
the  contract  still  to  perform.  A  consideration  is  executed 
upon  request  when,  for  instance,  a  party  furnishes  infor- 
mation in  response  to  an  offer  of  reward. )  In  such  case  it 
is  the  acceptor  who  completes  his  performance  when  he  be- 
comes a  party  to  the  contract  and  the  offeror  has  his  part  of 
the  contract  yet  to  execute  by  paying  the  promised  reward. 

§14.  Past  Consideration. — A  past  consideration  will 
not,  as  a  general  rule,  support  a  promise,  for  the  reason,  as 
we  have  seen  that  a  promise  to  be  binding  must  be  made  in 
view  of  a  pi:esent_  or  future  benefit.  A  past  consideration 
may  be  defined  as  some  past  act  or  forbearance  by  which 
one  has  bee^n  benefited  but  without  incurring  any  legal 
liability.  }(isro  matter  how  beneficial  such  a  service  may  have 
been  to  the  party  sought  to  be  charged,  it  will  not  create  a 
legal  liability  unless  rendered  at  his  express  request  or 
under  such  conditions  that  a  request  will  be  implied  by  law.^ 
(^ven  an  express  promise,  on  such  a  consideration  is  not, 
alone,  sufficient  to  give  rise  to  legal  liability.^^ 

§15.  Same — Exceptions  to  General  Rule.-^  past  con- 
consideration  will  support  a  subsequent  promise,  if  such 
consideration  was  given  at  the  request  of  the  promisor.  The 
leading  case  on  this  subject  is  Lanipleigh  v.  Braithwait,^^ 
wherein  the  defendant  had,  in  the  coiu"se  of  a  quarrel  with 
one  Mahume,  inflLicted  injuries  upon  the  latter  from  which 
he  died.  Braithwait,  was  thereupon  tried  and  sentenced  to 
death.  Lampleigh,  undertook  to  procure  his  pardon,  and 
after  many  efforts  obtained  an  audience  with  King  James, 
with  the  result  that  the  king  granted  Braithwait  an  uncon- 
ditional pardon.  Upon  gaining  his  liberty  Braithwait 
promised  to  pay  Lampleigh  $600  as  a  compensation  for  the 

"  Parsons  v.  Robinson,  15  N.  Y.,  Sup.,  Mass.,  448. 

138;  Shealy  v.  Toole,  56  Ga.,  210;      "1  Smith's  Leading  Cases,  267. 
Chamberlain     v.     Whitford,     102 


20         AMERICAN  EXTENSION  UNIVERSITY 

services  rendered.  When  the  time  for  the  promised  pay- 
ment arrived,  he  declined  to  keep  his  promise  and  Lamp- 
leigh  sought  redress  in  the  law.  The  court  held  that,  while 
ordinarily  a  voluntary  promise  cannot  be  enforced,  yet  if, 
as  in  the  case  at  bar,  the  past  services  were  rendered  upon 
the  request  of  the  party  who  subsequently  gives  the 
promise  based  upon  such  services,  the  promise  will  be  held 
legally  binding,  for  it  is  not  a  naked  promise  but  couples  it- 
self with  the  request  and  the  benefits  procured  thereby  to 
the  party  promising. 

This  ruling  has  been  criticised  by  various  authorities. 
It  has  been  suggested  by  Anson  in  his  work  on  Contracts 
that  the  true  rule  is  that  the  subsequent  promise  is  binding 
only  when  "the  request,  the  consideration  and  the  promise, 
form  substantially  one  transaction. ' '  It  has  also  been  said 
that  the  promise  must  be  such  as  the  law  implies  from  the 
nature  of  the  consideration  and  the  transaction.  In  other 
words,  that  the  promise  must  not  be  different  from  that  al- 
ready implied  by  the  law.^^  fit  has  also  been  held  that  '*if 
the  consideration,  even  without  request,  move  directly  from 
the  plaintiff  to  the  defendant,  and  inures  directly  to  the  de- 
fendant's benefit,  the  promise  is  binding  though  made  upon 
a  past  consideration,  j 

^  §16.  Barred  Debt  as  Consideration. — Another  excep- 
tion to  the  rule  holding  that  a  past  consideration  will  not 
support  a  present  promise  arises  according  to  some  writers, 
in  the  case  of  a  promise  to  pay  a  claim  barred  by  the  statute 
of  limitations.  A  debt  so  barred  may  constitute  the  con- 
sideration of  a  new  promise  to  pay,  for  a  debtor  may  re- 
nounce the  benefit  of  a  law  made  for  his  advantage.  If  he 
does  so,  and  promises  to  pay  his  obligation,  he  is  bound  to 
keep  his  promise.^^  However,  no  other  promise  than  one 
to  pay  the  debt  itself  will  be  supported  upon  the  consider- 
ation of  a  debt  barred  by  the  statute  of  limitations.  There 
is  considerable  doubt  whether  the  action  in  such  case  is 
upon  the  new  promise  or  upon  the  original  contract.  As 
a  rule  there  must  be  a  promise  in  writing,  or  such  a  dis- 
tinct and  express  recognition  of  the  debt,  as  to  raise  an 

"Merrick  v.  Giddings,  1  Mackey  (D.      "  Dusenbury  v.  Hoyt,  53  N.  Y.,  521; 

C),  394.  Hawkes  v.  Sanders,  Cowper,  289. 

"Booth  V.  Fitzpatrick,  36  Ver.,  681. 


DEPARTMENT  OF  LAW 


2i 


implied  promise  to  pay  it.  To  prevent  the  operation  of  the 
statute  of  limitations  there  must  not  only  be  an  admission 
of  the  existence  of  the  debt,  but  language  used  that  will 
imply  a  promise  to  pay  it.  For  this  reason,  and  inasmuch 
as  the  action  on  the  original  contract  is  barred,  some  courts 
hold  that  the  action  is  on  the  new  promise,  while  others  say 
that  the  debt  is  not  destroyed  by  the  statute  of  limitations, 
but  only  the  right  of  action  is  lost  thereby,  and  that  when 
that  is  restored  by  a  new  promise  to  pay  the  debt  the  action 
is  still  on  the  original  contract,  and  not  on  the  new  promise. 
A  number  of  cases  may  be  read  to  good  advantage  sup- 
porting both  theories.^*^ 

§17.  Forbearance  as  Consideration. — Forbearance  to 
exercise  a  legal  right,  may  be  sufficient  consideration  for  a 
promise.  Thus,  the  relinquishment  of  a  homestead  entry  on 
public  land,  and  the  withdrawal  of  a  contest  against  the 
claim  of  another,  is  a  valid  consideration  for  a  promise  to 
pay  money.  ^^  The  right  f oreborne  may  be  a  doubtful  one  and 
may  exist  against  a  third  party  instead  of  the  promisor,  but 
in  either  case  its  forbearance  will  legally  support  a  promise 
based  thereon.  However,  the  claim  must  be  a  legal  one,  as 
the  relinquishment  of  a  claim  that  could  not  be  enforced 
would  not  be  a  legal  consideration.^^ 

§18.  Compromise  as  Consideration. — A  compromise 
to  avoid  litigation  is  a  common  form  of  forbearance  as  a  con- 
sideration for  a  promise.  An  agreement  wherein  one  party 
forbears  to  bring  suit,  or  agrees  to  dismiss  a  pending  suit,  is 
based  upon  a  good  consideration,  and  can  be  enforced.  ^^ 
Where  the  whole  debt  is  undisputed,  part  payment  thereof 
will  not  be  a  legal  payment  in  full,  even  though  it  is  so 
agreed  at  the  time;  but  where  the  claim  is  at  all  in  dispute  a 


"Chabot  V.  Tucker,  39  Cal.,  180. 
Frisbee  v.  Seamen,  49  Iowa,  95. 
Wesner  v.  Stein,  97  Pa.  St.,  322. 
Patton  V.    Hassinger,    69    Pa.    St., 
311. 

Hill  V.  Henry,  17  Ohio,  9. 
Collar  V.  Patterson,  137  111.,  403. 
In  re  Kendrick,  107  N.  Y.,  104 

"  Pelham  v.  Service,  45  Kan.,  614. 

"Jones  V.  Ashburnham,  4  East,  463. 

"  Smart  v.  Chell,  7  Bowling's  Cases, 
781.  In  Parker  v.  Enslow,  102 
111.,  2  72,  the  plaintiff  had  been  ac- 
customed to  fill  his  pipe  from  to- 


bacco on  the  defendant's  counter. 
The  defendant  mixed  powder  with 
the  tobacco  and  the  result  was  an 
explosion  that  injured  the  plain- 
tiff's eyes.  He  threatened  to  bring 
suit,  but  accepted  the  defendant's 
promissory  note  for  an  agreed 
amount  in  compromise.  In  a  suit 
upon  the  note  the  court  held  that 
if  the  payee  of  the  note  believed  he 
had  a  cause  of  action,  his  forbear- 
ance to  sue,  was  a  consideration  for 
the  note.  Its  payment  was  there- 
fore enforced. 


22         AMERICAN  EXTENSION  UNIVERSITY 

partial  payment,  upon  the  agreement  that  it  is  given  and 
accepted  in  full  will  be  binding. 

To  constitute  a  compromise  a  valid  consideration,  it 
is  necessary  that  the  plaintiff  believe  in  his  case,  and  have 
a  bona  fide  intention  of  bringing  action  honestly  thereon. 
If  this  is  so,  a  compromise,  whether  it  is  made  before  liti- 
gation is  commenced  or  afterwards,  although  he  has  in 
truth  no  cause  of  action  and  the  defendant  knows  it,  is 
valid.^^  If  a  man  bona  fide  believes  he  has  a  fair  chance 
of  success,  he  has  a  reasonable  ground  for  suing,  and  his 
forbearance  to  do  so  will  constitute  a  good  consideration. 
When  such  a  person  forbears  to  sue  he  gives  up  what  he 
believes  to  be  a  right  of  action,  and  the  other  party  gets  an 
advantage,  and  instead  of  being  annoyed  with  an  action  he 
escapes  from  the  vexation  incident  to  it.  It  would  be  an- 
other matter  if  a  person  made  a  claim  which  he  knew  to  be 
unfounded,  and  by  a  compromise  obtained  an  advantage 
under  it.     In  such  case  his  conduct  would  be  fraudulent.^/ 

An  agreement  to  forbear  to  bring  suit  will  support  a 
promise  although  no  fixed  length  of  time  of  forbearance  is 
agreed  upon.  What  is  a  reasonable  time  would  depend 
upon  the  circumstances  of  each  case.  Whenever  there  is  an 
agreement  for  a  length  of  time  not  stated,  and  there  is  after- 
wards an  actual  forbearance,  there  is  a  consideration  for  the 
promise  to  pay.^^ 

§19.  Existing  Legal  Obligations  as  Consideration. — 
An  existing  obligation  is  not  a  good  consideration  for  a  new 
promise.  In  other  words  the  performance  of  an  act  which 
a  party  is  already  under  obligation  to  perform  is  not  a  legal 
consideration  for  a  new  promise.^^  There  are  a  number  of 
qualifications  and  examples  of  this  principle  to  be  set  forth. 
The  payment  of  a  smaller  sum  in  satisfaction  of  a  larger 
claim  does  not  discharge  the  debt,  as  we  have  already  seen, 
unless  the  claim  is  a  disputed  one.  This  rule  is  somewhat 
technical  and  the  courts  have  shown  some  readiness  to  de- 
part from  it  on  slight  distinctions.  For  instance  it  has 
been  held  that  a  negotiable  security  of  a  face  value  less 
than  the  amount  of  the  undisputed  claim  may  operate  as  a 
full  discharge  thereof  if  given  and  taken  in  satisfaction  of 

"Weftrem  v.  Kuhn,  61  N.  Y.,  623.  «  Traders'  Bank    v.    Parker,    130    N. 

"Callisher     v.     Bischoffsheim,  Y.,  415. 

5  Queen's  Bench.  449.  *■  Rundle  v.  Kettering,  127  Iowa,  6. 


DEPARTMENT  OF  LAW  23 

the  debt.-^ 

The  rule  above  stated  is  qualified  where  something 
other  than  money  is  taken  in  satisfaction  of  a  debt.  ' '  The 
gift  of  a  horse,  hawk  or  robe  in  satisfaction  of  a  debt  is  good. 
For  it  shall  be  intended  that  a  horse,  hawk  or  a  robe  might 
be  more  beneficial  to  the  plaintiff  than  money  in  respect  of 
the  circumstances,  or  otherwise  the  plaintiff  would  not  have 
accepted  it  in  satisfaction,"  said  an  earl}^  court.^^  The 
giving  of  further  security  for  a  debt,  although  for  a  smaller 
sum,  and  the  acceptance  of  it  as  a  full  payment,  extin- 
guishes the  entire  debt.  Thus  when  a  party  who  owed  a  cer- 
tain amount  on  open  account,  gave  a  note  for  half  that  sum, 
secured  by  a  mortgage,  under  the  agreement  that  it  should 
be  accepted  in  full  discharge,  the  court  held  that  no  action 
could  be  brought  for  the  balance  of  the  account.^®  So,  too, 
the  case  of  a  debtor  who  gives  his  note  indorsed  by  a  third 
party  for  a  less  sum  than  the  debt,  the  additional  security 
is  a  good  consideration  for  remitting  part  of  the  debt.^' 
It  has  also  been  held  that  when  payment  of  a  part  of  a 
debt  is,  upon  the  creditor's  request  provided  for  in  some 
manner,  place  or  time  different  from  that  provided  for  in 
the  original  contract,  a  consideration  thereby  arises  for  the 
promise  of  the  creditor  given  therefor.^^ 

^The  principle  underlying  these  decisions,  apparently,  is 
that  a  simple  promise  by  a  creditor  to  accept  a  smaller  sum 
in  discharge  of  a  larger  amount  due  is  void  because  the  debt- 
or does  only  what  he  is  legally  bound  to  do;  but  if  there  is 
any  new  term  that  offers  a  possibility  of  legal  benefit  to  the 
creditor,  that  furnishes  consideration  for  the  promise  to 
forego  the  balance  of  the  debt.^V  ^Where  there  is  an  inde- 
pendent consideration,  or  the  ci^ditor  receives  any  benefit,' 
or  is  put  in  a  better  position,  or  one  from  which  there  may 
be  a  possibility  of  legal  benefit  to  which  he  was  not  entitled 
except  for  this  agreement,  then  the  agreement  is  not  a  bare 
promise  and  will  legally  hold.) 

§20.    Composition    with    Creditors. — A    composition 

"  Goddard     v.     O'Brien,     3     Queen's  ^  Schweider  v.  Lang,  29  Minn.,  254. 

Bench,  Div.,  37;    Kellogg  v.  Rich-  Rose  v.  Hall,  26  Conn.,  392. 

ards,  14  Wend.,  116.  =•  Hall  v.  Smith,  15  Iowa,  584. 
"Bull  V.  Bull,  43  Conn.,  455.  Allison  v.  Abendroth,    108    N.    Y., 

="JafEray  V.  Davis,  12  4  N.  Y.,  164.  470. 

"Varney  v.  Conery,  77  Me.,  527. 


24         AMERICAN  EXTENSION  UNIVERSITY 

with  creditors  may  appeaf  to  be  an  exception  to  the  general 
rule  stated,  inasmuch  as^  composition  is  a  parol  agreemen" 
by  a  creditor  to  accept  less  of  a  liquidated  debt  than  is  due 
him.^''  )  Nevertheless,  where  several  creditors  agree  with 
their  debtor,  and  with  each  other,  to  accept  a  portion,  a  per- 
centage, of  his  indebtedness  to  them  in  payment  of  the 
whole  debt,  the  forbearance  of  the  other  creditors  is  the 
legal  consideration  to  each  one  of  them,  as  it  precludes  the 
possibility  of  his  losing  his  entire  claim. 

When  an  insolvent  firm  makes  an  agreement  with  all 
its  creditors,  whereby  the  creditors  agree  to  accept,  for 
instance,  twenty-five  cents  on  the  dollar  in  full  satisfac- 
tion of  their  claims,  the  firm,  by  complying  therewith,  is 
discharged  from  its  indebtedness.^^  As  stated  before  a 
binding  compromise  of  an  undisputed  indebtedness  cannot 
be  made  between  a  debtor  and  a  single  creditor,  as  a  legal 
consideration  would  in  such  case  be  lacking,  but  where  all 
one's  creditors  join  in  such  agreement  the  rule  changes  for 
the  reason  given.  If  creditors  merely  agree  to  extend  the 
time  of  payment,  there  is  no  composition.^^  However,  if 
the  debtor  makes  some  concession,  such  for  instance  as  the 
payment  of  interest  in  advance,  the  agreement  to  extend 
time  will  be  valid.^^  In  case  the  debtor  fails  to  comply 
with  the  terms  of  the  composition,  the  creditors  may  sue 
for  their  original  claims.  ^^  A  composition  is  valid  without 
the  debtor  being  a  party  to  it.  as  his  acting  upon  it  is  suf- 
ficient to  bind  the  creditors.  (It  must  be  kept  in  mind  that 
a  composition  with  creditors  is  not  an  exception  to  the  gen- 
eral principle  of  consideration.  )  The  creditor  not  only  gets 
the  payment  of  the  agreed  percentage  of  his  claim  from  the 
debtor,  but  he  gets  a  promise  from  the  other  creditors  that 
they  too  will  be  content  with  the  same  percentage. 

§21.  Moral  Obligation  as  Consideration. — ^A  mere 
moral  obligation  is  not  a  valuable  consideration,  and  will 
not  support  a  promise.  If  a  debt  is  voluntarily  released  by 
the  creditors,  a  subsequent  promise  to  pay  it,  made  by  the 
debtor,  is  without  consideration,  and  accordingly  void,  al- 
though he  is  still  morally  obligated  to  his  creditors.  ^^ 
Where   goods   were  sold   to   a     minor  child  without  the 

••Kahn  v.  Gumberts,  9  Ind.,  430.  "Warner  v.  Campbell,  26  111.,  282 

••Pierce  v.  Jones,  8  S.  C,  273.  "Edwards  v.  Coombe,  7  C.  P.  519. 

"Henry  v.  Patterson,  16  Pa.  St.,  346.      "Hale  v.  Rice,  124  Mass.  292. 


DEPARTMENT  OF  LAW  25 

parent's  knowledge  or  consent,  it  has  been  held  that  the 
subsequent  promise  of  the  parent  to  pay  was  invalid,  as 
being  without  legal  consideration.^®  However,  where 
there  is  some  antecedent  legal  liability  to  which  a  moral 
obligation  can  attach,  a  promise  based  thereon  will  ac- 
quire a  binding  character.  ^^  For  instance,  where  one 
promises  to  pay  a  debt  barred  by  the  statute  limitations,  or, 
after  he  reaches  his  majority  promises  to  pay  a  bill  incurred 
when  he  was  a  minor. 

While  it  is  true  that  where  circumstances  of  urgent 
necessity  put  a  person  under  moral  and  legal  obligation  to 
do  an  act  for  which  the  law  may  imply  a  promise  to  pay,  the 
general  rule  is  that  any  act  done  for  the  benefit  of  another 
without  his  request  is  deemed  voluntary,  and  purely  a  gift 
of  service,  and  no  action  upon  it  can  be  maintained.  This 
rule  is  based  upon  the  principle  that  a  man  cannot  invol- 
untarily— that  is  without  his  acquiescing  will — be  put  in 
debt  to  another.  Thus  when  B  moved  a  stack  of  J's  wheat 
to  save  it  from  fire  without  the  knowledge  of  J,  he  was  not 
allowed  to  recover  for  his  work  as  the  act  was  wholly  vol- 
untary, and  the  moral  obligation  on  J  to  make  some  just 
compensation  for  the  service  was  not  sufficient  in  law  to 
permit  a  recovery  by  legal  action.^^  However,  the  known 
acceptance  of  a  benefit  may  raise  an  implied  promise  to 
pay  therefor.  Thus  if  a  man  build  a  house  or  fence  upon 
the  land  of  another  with  his,  the  latter 's  knowledge  and 
assent,  the  law  raises  an  obligation  on  his  part  to  pay  for 
it  what  it  is  reasonably  worth,  since  he  has  been  benefited 
to  that  extent  and  knowingly  permitted  it  built.  If  he  did 
not  intend  to  pay  for  it,  it  was  his  legal  duty  to  forbid  its 
construction,  or  at  least  give  notice  that  he  would  not  be 
chargeable  for  its  cost.^® 

§22.  Mutual  Promises  as  Consideration.-f-A  promise 
for  a  promise — where  one  agrees  to  do  a  thing  named  if  an- 
other will  do  a  certain  other  thing  named,  which  the  latter 
agrees  to  do. — is  a  sufficient  consideration.^^ 

"Freeman  v.  Smalley,  38  N.  J.,  Law,  "This  was  treated  under  the  section 

383.  on  Kinds    of    Consideration,    ante 

"  Greenabaum  v.  Elliott,  63  Mo.,  25.  §1*3,  but  see  McNish  v.   Reynolds, 

"  Braithwaite  v.    Johnson,    20    John,  95  Pa.,  483;  Greve  v.    Ganger,    36 

28.  Wis.,  369;  Coleman  v.  Eyre,  45  N. 

*»  Cincinnati  Ry.  V.  Densky,    51    Fed.  Y.,  38. 
Rep..  738. 


26         AMERICAN  EXTENSION  UNIVERSITY 

§23.  Unreal  Consideration. — Before  leaving  this  sub- 
ject there  remains  to  be  pointed  out  certain  semblances  of 
consideration,  that  is  to  say  certain  factors  which,  though 
having  a  bearing  upon  a  contract  and  to  some  extent  being 
its  basis,  yet  does  not  constitute  a  legal  consideration,  and 
which  the  courts  have  held  insufficient  to  support  a  promise. 
Such  factors  may  be  termed  unreal  considerations.  The 
first  of  these  to  be  considered  is  motive.  Cases  have 
sometimes  arisen  in  which  these  has  been  an  attempt  to 
substitute  motive  for  consideration.  These  are  cases  in 
which  a  party  has  promised  to  do  a  thing,  not  because  it 
would  be  a  benefit  to  himself,  but  because  he  wanted  it 
done,  or  thought  it  ought  to  be  done.  The  confusing  of 
motive  and  consideration  gave  rise  to  the  view,  at  one 
time  maintained,  that  a  moral  obligation  would  support 
a  promise.  The  existence  of  natural  affection  has  in  many 
instances  furnished  a  motive  for  a  promise,  but  is,  never- 
theless, not  in  law,  a  consideration.  At  one  time  the  courts 
held  that  if  A  made  a  promise  to  B  to  do  something  for  the 
benefit  of  B's  son,  the  nearness  of  relationship  would  enable 
B's  son  to  sue  upon  the  contract  although  he  was  not  a 
party  to  it.    This  is  not  now  the  case. 

One  who  is  not  a  party  to  a  contract  is  not  entitled  to 
sue  upon  it  on  account  of  nearness  of  relationship  to  one 
of  the  contracting  parties,  even  though  the  contract  has 
been  made  for  his  benefit.  An  uni'eal  consideration  also 
arises  when  one  promises  to  do  what  he  is  already  legally 
bound  to  do,  for  in  such  a  case  the  promisee  would  receive 
nothing  more  than  he  was  entitled  to.  Thus,  a  promise  to 
surrender  stolen  property  is  no  consideration  for  a  promise 
to  pay  money,  inasmuch  as  the  holder  of  stolen  property  is 
already  legally  bound  to  surrender  it.'*'^  On  the  same  sus- 
taining principle  a  promise  to  pay  a  witness  more  than  his 
legal  fees  cannot  ordinarily  be  enforced."*-  But  if  a  witness 
agrees  to  remain  where  service  of  summons  can  be  more 
readily  had  upon  him,  or  to  attend  without  summons  when 
only  his  deposition  might  otherwise  have  been  obtained, 
there  is  then  a  legal  consideration  for  such  a  promise.  A 
public  officer  cannot  legally  receive  any  other  consideration 
tor  the  performance  of  a  public  duty  than  the  compensation 

"  Worthen  V.     Thompson,     54     Ark.,      "Dodge  v.  Stiles,  26  Conn.,  423. 

1.3l. 


DEPARTMENT  OF  LAW  27 

allowed  by  law.  This  is  an  ancient  principle,  and  it  has 
been  steadily  adhered  to  as  being  necessary  to  save  the 
community  from  extortion  and  oppression.^"^ 

It  has  been  held  that  a  watchman  employed  by  a  city 
cannot  claim  a  reward  for  the  arrest  of  a  criminal  inasmuch 
as  he  did  nothing  outside  his  duty  as  a  watchman. ^^  How- 
ever, the  performance  by  any  public  officer  of  services  he  is 
not  bound  to  render,  may  become  the  subject-matter  of  coii^ 
tract.  The  rule  that  neither  the  promise  to  do  nor  the  ac- 
tual doing  of  that  which  the  promisor  is  by  law,  or  by  sub- 
sisting contract,  bound  to  do,  will  support  a  promise  in  his^ 
favor,  is  elementary  law.^^  For  instance,  for  a  mortgagor* 
to  surrender  mortgaged  premises  after  default  in  the  mort- 
gage so  as  to  save  the  mortgagee  trouble  in  getting  posses- 
sion of  the  property  will  not  support  a  promise  from  the 
mortgagee  given  in  consideration  of  the  mortgagor  so 
doing. ^^  A  case  may,  however,  be  taken  out  of  this  gen- 
eral rule  by  contingencies  which  release  one  party  to  the 
contract  from  his  legal  obligations  to  perform  according  to 
stipulated  terms;  in  which  case  the  new  promise  rests  on  a 
valid  consideration  and  will  be  binding.^'  In  the  case  last 
cited  the  unforseen  discovery  of  quicksand  in  the  per- 
formance of  a  contract  for  ordinary  excavation,  was  held  to 
properly  support  a  new  consideration  given  for  having  the 
work  continued  under  the  added  labor  and  expense  made 
necessary  by  the  quicksand.  An  action  cannot  be  sus- 
tained upon  the  nonperformance  of  acts  which  another 
person  is  bound  to  do,  as  such  rule  might  subject  persons 
having  obligations  to  many  annoyances.  But  when  there 
is  a  promise  to  give  recompense  for  such  performance,  it 
ratifies  the  act  done  and  is  binding. ^^ 

§24.  Impossible  Consideration. — Another  semblance 
of  consideration  arises  when  there  has  been  a  promise  to  do 
something  legally  impossible;  or  where  the  promise  is  so 
vague  that  it  is  impossible  to  secure  its  performance.  Legal 
impossibility  at  the  time  the  contract  is  made,  to  do  the 
thing  promised,  renders  it  void.  When  a  person  in 
custody  of  his  creditor's  bailiff  agreed  that  in  considera- 

"  Kick  V.  Merry,  23  Mo.,  72.  *"  Wendover  v.  Baker,  121  Mo.,  273. 

"Pool  V.   Boston,   5   Cush.,  219.  "  Meech  v.  City  of  Buffalo,  29  N.  Y.. 

"  Esterly  Machine  Co.  v.  Pringle,  41  198. 

Neb.,  265.  '"Doty  v.  Wilson,  14  Jonns.,  378. 


28         AMERICAN  EXTENSION  UNIVERSITY 

tion  of  the  bailiff's  discharging  him  from  the  debt  he 
would  do  certain  work,  which  the  bailiff  accepted,  the 
court  held  that  the  promise  was  void  and  hence  unenforce- 
able, inasmuch  as  it  was  legally  impossible  for  the  bailiff 
to  discharge  his  master's  debt/^  /\¥hen  continuance  of 
work  on  a  building  is  forbidden  by  an  inspector  authorized 
by  law,  for  a  defect  not  caused  by  the  contractor,  further 
performance  of  the  contract  becomes  an  impossibility  and 
the  contractor  cannot  be  held  to  the  fulfillment  of  his  con- 
tract until  after  the  proper  official  consent  is  given.  ^"  In 
cases  where  complete  performance  becomes  impossible  by 
act  of  law,  the  party  doing  the  work  is  entitled  to  recover 
for  that  part  of  it  which  he  has  done.^^^ 

Contracts  for  personal  services  are  subject  to  the  im- 
plied condition  that  the  party  to  perform  shall  remain  alive 
and  in  sufficient  health  to  carry  out  his  agreement.^^  An 
agreement  to  work  on  a  farm  is  revoked  by  illness.  ^^  So, 
also,  under  like  circumstances,  an  agreement  to  render  legal 
services.  ^^  However,  an  impossibility  of  performance 
caused  by  the  promisor  himself  constitutes  a  breach  of  con- 
tract for  which  he  is  liable. 

Lastly,  a  consideration  may  be  unreal  because  of  im- 
possibility, in  case  where  the  promise  is  so  vague  as  to  be 
unenforceable.  Thus,  in  an  action  upon  a  promissory  note 
the  defendant  set  up  a  promise,  made  by  his  father,  the 
plaintiff,  to  whom  the  note  was  given,  that  he  would  release 
him  from  all  liability  on  the  note  upon  his  ceasing  to  make 
certain  complaints  that  he  had  not  enjoyed  advantages 
common  to  the  other  children.  The  court  said  that  the  son's 
promise  to  do  so  was  too  vague  to  support  the  promise  of 
discharge  of  the  debt  and  ruled  accordingly.^^ 

§25.  Failure  of  Consideration. — Where  the  consider- 
ation of  a  contract  fails  the  party  to  whom  such  considera- 
tion ran  cannot  be  held  to  fulfill  his  part  of  the  agreement.^* 
For  example,  if  a  man  purchases  a  horse  which  it  turns  out 
had  been  previously  stolen,  and  the  owner  from  whom  it 
was  stolen,  upon  proper  proof  of  ownership,  regains  the 

*  Harvey  v.  Gibbons,  2  Lev.  161.  "  Coe  v.  Smith,  4  Ind.,  79;  Evans  v. 

"Heine  v.  Meyer,  61  N.  Y.,  171.  Wood,  L.  R.,  5  Eq.   9. 

"Jones  v.  Judd,  4  N.  Y.,  412.  "» White  v.  Bluett,  23  L.  J.  Exch.,  36. 

"Green  v.  Gilbert,  21  Wis.,  395.  "Rice  v.  Goodard,  14  Pac.  Rep.,  293. 
"Dickey  v.  Linscott,  20  Maine,  453. 


DEPARTMENT  OF  LAW  29 

animal  from  the  purchaser,  the  latter  camiot  be  compelled 
to  pay  for  the  horse  if  he  has  not  already  done  so;  and  if  he 
has  he  may  legally  recover,  from  his  vendor,  the  amount 
paid.  This,  because  the  consideration  for  his  promise  to  pay 
— or  for  his  payment — ^has  failed. 

Such  a  case  is  an  illustration  of  what  is  termed  a  total 
failure  of  consideration.  Where  such  failure  is  only  par- 
tial then  the  injured  party's  remedy  is  only  proportionate 
to  such  failure,  provided  the  consideration  and  the  promise 
can  be  divided.^^ 

In  order  for  failure  of  consideration  to  render  a  con- 
tract wholly  or  partially  void,  as  the  case  may  be,  it  is  nec- 
essary that  a  mistake  as  to  same  have  been  in  the  minds  of 
the  contracting  parties,  and  the  failure  must  have  been  in 
existence  at  the  time  the  contract  was  made. 

67  Gibbons  v.  Pilke,  37  Mich.,  380  . 


QUIZZEE 

CONSIDERATION 


1-  §9.    Is  a  mutual  intention  to  form  a  contract  itself  suf- 

ficient to  do  so'? 

2-  If  not,  what  other  element  is  essential? 

3-  Upon  what  essential  is  every  simple  contract 

based? 

4-  Define  the  consideration  of  a  contract. 

5-  What  does  consideration  mean? 

6-  Give  illustration  of  some  common  forms  of  con- 

sideration. 

7-  What  two  essentials  are  necessary  in  every  form 

of  consideration? 

8-  What  is  meant  by  a  *' legal"  consideration? 

9-  What  relation  must  the  consideration  bear  to  the 

time  of  the  promise  given  therefor? 
10-§10.     What  is  the  legal  effect  of  affixing  a  seal  to  a 
contract? 

11-  What  is  the  chief  practical  legal  benefit  of  seals? 

12-  Wliat  does  a  seal  on  a  contract  import  ? 

13-  Can  an  instrument  under  seal  be  enforced  if  no 

consideration  was  in  fact  given — and  why? 


30         AMERICAN  EXTENSION  UNIVERSITY 

14- §11.    What  is  necessary  to  the  validity  of  all  contracts  ? 

15-  Is  a  naked  promise   enforceable   by  law — and 

why'? 

16-  Give  illustration  of  a  considerationless  promise. 
17-§12.     Must  the  consideration  have  value? 

18-  Must  the  consideration  be  adequate  '^  Why  1 

19-  What  satisfies  the  law  with  reference  to  consid- 

eration? 

20-  Give  two  illustrations  of  cases  where  contracts 

have  been  upheld  because  of  sufficiency  of  con- 
sideration. 

21-  Will  the  courts  ever  inquire  into  the  adequacy  of 

consideration?    If  so,  what  court,  and  when? 

22-  What  is  the  legal  basis  of  judicial  interference  in 

any  such  case? 
23-§13.    Name  the  two  kinds  of  consideration  and  define 
them. 

24-  What  may  be  the  consideration  of  a  promise?, 

25-  When  is  a  contract  said  to  be  upon  an  executory 

consideration? 

26-  Give  illustration  of  a  promise  as  consideration  for 

a  promise. 

27-  What  is  essential  in  mutual  promises  to  base  a 

contract  thereon? 

28-  When  is  a  consideration  said  to  be  executed? 

29-  Distinguish  between  the  two  forms  of  executed 

consideration.     Illustrate  each  of  them. 

30-  What  is  meant  by  an  "acceptance  of  an  executed 

consideration?" 

31-  What    by    a     consideration    "executed    upon 

request?" 
32- §14.    Will  a  past  consideration  support  a  promise, 
and  why? 

33-  Define  a  past  consideration. 

34-  Under  what  circumstances  will  it  create    a   legal 

liability? 
35-§15.    What  exceptions  are  there  to  the  rule  that  a  past 
consideration  will  support  a  promise  ? 

36-  State  the  case  of  Lampleigh  v.  Braitwait. 

37-  What  rule  does  it  state  ? 

38-  What  other  rules  have  been  suggested  in  criticis- 

ing that  given  ? 


DEPARTMENT  OF  LAW  31 

39-  Which  rule  is  founded  on  the  better  reason"? 

40-§16.    What  promises  will  be  supported  by  a  debt  barred 
by  the  statute  of  limitations  *? 

41-  Where  there  is  a  promise  to  pay  a  debt  so  barred, 

and  an  action  is  brought  thereon,  upon  what 
is  the  action  based? 

42-  What  is  necessary  for  such  a  new  promise  to  make 

it  binding? 

43-  What  is  the  effect  of  the  statute  of  limitations 

upon  the  debt? 
44-§17.     May  forbearance  be  a  sufficient  consideration? 

45-  Illustrate  forbearance  as  a  consideration. 

46-  What  is  an  essential  factor  of  a  claim    to    render 

forbearance  thereof  ample  consideration? 
47- §18.    Is  a  compromise  of  a  claim  a  good  consideration  ? 

48-  Define  compromise. 

49-  When  will,  and  when  will  not,  part  payment  be  a 

legal  settlement  of  a  claim? 

50-  What  is  necessary  to  constitute  a  compromise  a 

valid  consideration? 

51-  What  legal  effect  does  a  bona-fide  belief  in  one's 

claim  have  upon  a  compromise  based  on  the 
claim? 

52-  What  is  the  legal  effect  of  the  compromise  of  a 

claim  known  by  the  claimant  to  be  unfounded  ? 

53-  ,    Does  the  fixing  of  a  time  of  forbearance  affect  the 

sufficiency  of  a  promise  given  therefor? 

54-  If  no  time  of  forbearance  is  fixed,  what  length  of 

time  governs? 

55-  AVhat  is  the  status  where  no  time  is  named,  but  ac- 

tual forbearance  is  given? 
56- §19.    Is  an  existing  obligation  a  good  consideration  for 
a  new  promise  ? 

57-  State  the  rule  on  that  question. 

58-  What  is  the  attitude  of  the  courts    towards    this 

rule? 

59-  Give  illustration  of  an  exception  thereto. 

60-  What  is  the  effect  of  giving    something    besides 

money  as  consideration  for  forbearance  ? 

61-  What  is  the  effect  of  giving  additional  security  in 

such  consideration?    State  the  rule. 


32         AMERICAN  EXTENSION  UNIVERSITY 

62-  What  is  the  effect  of  change  in  the  manner,  time 

or  place  of  payment  at  the  creditor's  request, 
as  basis  of  forbearance  *? 

63-  What  principle  of  law  underlies  these    and    like 

cases? 

64-  When  is  an  agreement  not  a  bare  promise  ? 
65-§20.    Define  what  a  "composition  with  creditors"  is. 

66-  When  creditors  effect  a  composition  what  is  the 

consideration  moving  to  and  from  each  party 
thereto  ? 

67-  What  is  the  legal  effect  of  a  debtor  complying 

with  a  composition? 

68-  Can  a  composition  be  made  between  a  debtor  and 

a  single  creditor? 

69-  Is  extension  of  time  of  payment  a  composition? 

70-  What  would  bind  creditors  to  an  agreement  to  ex- 

tend time  ? 

71-  If  debtor  fails  to  keep  the  terms  of  the  comjiosi- 

tion  what  remedy  has  the  creditors? 

72-  Is  a  composition  with  creditors  an  exception  to 

the  general  rule  governing  consideration? 
73-§21.     Is  moral  obligation  a  valuable  consideration? 

74-  Can  a  promise  to  pay  a  debt,  once  voluntarily  re- 

leased, be  enforced, — and  why? 

75-  State  a  case  where  moral  obligation  will  not  com- 

pel legal  liability. 

76-  What  effect,  if  any,  will  an  antecedent  legal  lia- 

bility have  on  moral  obligation  as  a  considera- 
tion? 

77-  Can  an  action  be  maintained  on  an  act  done  for 

the  benefit  of  another  but  without  his  request? 
If  so,  when? 

78-  From    what  does  the    obligation    arise  in  such 

cases  ? 

79-  Upon  what  principle  is  this  rule  based? 

80-  What  may  create  a  promise  to  pay  under  such 

circumstances  ? 
81-  What  must  one  do  to  escape  legal  liability  under 

such  circumstances? 
82-§22.    Does  a  promise  for  a  promise  furnish  a  good  con- 
sideration? 


DEPARTMENT  OP  LAW  33 

83-§23.    What  is  an  unreal  consideration? 

84-  Is  motive  a  good  consideration'? 

85-  What  can  you  say  as  to  motive  as  a  considera- 

tion? 

86-  Does  relationship  to  a  contracting  party  give  one 

a  legal  right  to  sue  on  a  contract  made  by  him? 

87-  Is  a  promise  to  do  what  one  is  legally  bound  to  do 

a  good  consideration  for  another  promise? 
Give  illustration. 

88-  Can  a  witness  enforce  a  promise  to  give  him  more 

than  his  legal  fees?    When? 

89-  Can  an  officer  of  the  law  legally  receive,  or  legal- 

ly enforce  a  promise  to  pay  to  him,  anything 
beyond  his  legal  compensation, — and  why? 

90-  When  may  a  public  officer  receive  private  com- 

pensation— and  why? 

91-  Can  one  under  contractual  obligation  to  anoth- 

er enforce  a  promise  given  him  upon  consider- 
ation of  his  fulfilling  such  contract?  Why, 
and  illustrate. 

92-  Under  what  condition  can  a  promise  so  made  be 

enforced? 

93-  Can  legal  action  be  based  upon  non-performance 

of  another's  contract — and  why? 
94-§24.     What  is  the  effect  upon  a  contract,  of  legal  im- 
possibility to  fulfill  it?    Illustrate. 

95-  To  what  implied  conditions  are  contracts  for  per- 

sonal services  subject? 

96-  Give  illustrations  of  contract  where  such  condi- 

tion prevails. 

97-  What  is  the  rule  of  liability  where  party  himself 

causes  the  impossibility  to  perform  his  con- 
tract? 

98-  What  is  the  effect  upon  a  promise,  of  vagueness 

therein    as  affecting    it  as    a  consideration? 
Give  illustrative  case. 
99-§25.    What  is  failure  of  consideration? 
100-  What  effect  on  a  contract  does  failure  of  consid- 

eration have?  State  effect  where  failure  is 
total  and  where  it  is  partial. 


34         AMERICAN  EXTENSION  UNIVERSITY 

101-  Give  illustration  of  a  total  failure  of  considera- 

tion. 

102-  Wliat  is  necessary  in  order  to  give  total  or  par- 

tial failure  this  effect  on  a  contract? 


DEPARTMENT  OP  LAW         35 

LESSON  4.— 

CHAPTER  IV. 

LAWFULNESS  OP  PURPOSE. 

§26.  In  General. 

27.  Agreements  Furthering  Crime  or  Fraud. 

28.  Agreements    Furthering   Prohibited  Acts. 

(a)  Generally. 

(b)  Wagers. 

(c)  Usury. 

(d)  Sunday  Contracts. 

(e)  Business  Occupation  Restrictions. 

29.  Agreements  Contrary  to  Public  policy. 

(a)  Affecting   Public   Service. 

(b)  Lobbying  Contracts. 

(c)  Affecting    Public    Justice. 

(d)  In  Restraint  of  Trade. 

30.  Effect  of  Illegality. 

(a)  Generally. 

(b)  Divisibility  of  Legal  from  Illegal  Consideration. 

(c)  Lawful  Promise  for  Illegal  Consideration. 

§26.  In  General. — Courts  are  instituted  to  carry  into 
effect  the  laws  of  a  country,  and  cannot,  therefore,  be  made 
auxilliary  to  the  consummation  of  violations  of  law.^  That 
is  to  say,(the  law  will  not  sanction  the  carrying  out  of  un- 
lawful objects  and  will  not  enforce  agreements  having  such 
purpose  in  view,  or  the  enforcement  of  which  would  work 
such  a  result. 

(  Accordingly  any  act  which  violates  the  law,  either  be- 
cause it  is  evil  in  itself  or  because  it  is  prohibited  by  statute; 
and  any  act  which  is  in  aid  of,  or  auxiliary  to,  such  evil,  or 
such  prohibited  act,  cannot  be  made  the  basis  of  a  legal  con- 
tract.^ Acts  which  are  indictable,  those  subject  to  a  pen- 
alty or  forfeiture,  or  those  in  any  other  manner  the  subject 
of  prohibitive  legal  rule  are  included  in  this  class.^ 

Unlawful  agreements  may  be  broadly  classified  as 
agreements  in  violation  of  positive  law,  and  agreements  con- 
trary to  public  policy.  It  is  not  possible  always  to  distin- 
guish absolutely  between  the  two  classes  and  for  this  rea- 
son the  classification  made  is  to  be  regarded  as  for  conveni- 
ence in  discussion. 

§27.  Agreements  Furthering  Crime  or  Fraud. — Al- 
though it  seems  unnecessary  to  do  so,  yet  it  is  proper  to 

*  Bank  of  United  States    v.    Owens.  v.  Nichols,  12   La.,   398;    Petersen 

2  Peters,  527.  v.  Christensen,  26  Minn.,  377. 

'Bishop  on  Contracts,  471;  Reynolds     'Cannon  v.  Boyce,  101  U.  S.,  508. 


36         AMERICAN  EXTENSION  UNIVERSITY 

state  that  an  agreement  to  commit  a  crime  or  any  unlawful 
offense,  is  illegal.'' 

Thus,  any  agreement  to  carry  out  an  object  in  itself 
lawful,  by  means  of  fraud,  trespass,  breach  of  trust  ^ 
breach  of  contract  is  unlawful  and  void.  Such  acts,  even 
though  not  of  necessity  criminal,  are  nevertheless  contrary 
to  positive  law.^  Other  agreements  that  are  void  because 
they  are  based  upon  a  civil  wrong  are  agreements  in  fraud 
of  creditors.  If,  in  order  to  secure  a  compromise  with  his 
creditors,  a  debtor  secretly  promises  one  or  more  of  them  to 
pay  him  or  them  more  than  the  others,  the  agreement  is 
void,  as  in  fraud  of  such  others.  Such  a  stipulation  by  a 
creditor  for  a  preference  is  entirely  void,  and,  according 
to  some  courts,  he  not  only  loses  his  preference  but  the  ben- 
efit of  the  compromise.®  However,  the  New  York  courts 
hold  that  only  the  secret  agreement  is  void,  and  that  the 
creditor  is  entitled  to  the  benefit  of  the  general  compro- 
mise.'^ When  property  is  offered  for  sale  at  public  auction, 
an  agreement  to  secure  fictitious  bids  and  thus  increase  the 
price  is  a  fraud  on  the  buyer  and  no  legal  rights  can  arise 
from  it,  as  against  such  buyer  if  he  afterwards  refuses  to 
honor  his  bid.  Any  person  so  employed  to  make  false  bids 
cannot  recover  on  a  promise  of  compensation  therefor  made 
to  him.  The  purchaser's  bid  in  such  a  case  is  voidable  on 
his  part.  This,  however,  is  not  because  of  any  illegality  in 
the  contract  itself,  but  because  of  the  fraud  practiced  upon 
him.  It  is  worth  while  here  to  note  the  distinction  between 
fraud  and  illegality.  Inasmuch  as  fraud  is  a  civil  wrong, 
any  agreement  to  commit  a  fraud  is  illegal  and  the  contract 
for  the  commission  of  such  a  fraud  is  void  for  illegality.^) 
But  as  between  the  parties  to  the  fraudulent  contract,  the 
fraud  of  the  one  makes  the  consent  of  the  other  unreal,  and 
therefore  the  defrauded  party  may  avoid  the  contract  if  it 
has  not  been  executed.  In  other  words,  if  A  fraudulently 
induces  B  to  make  a  contract,  B's  consent  is  not  legally 
genuine,  because  of  A's  fraud,  and  the  contract  is  voidable. 
If  A  and  0  enter  into  a  contract  for  the  purpose  of  defraud- 

*  Clement's  Appeal,    52    Conn.,    464;  N.  Y.,  469. 

Commissioners  V.  McComb,  19  Ohio      "  Kullman    v.    Greenebaum,    92    Cal., 
St.,  320.  403;  O'Shea  v.  Oil  Co.,  42  Mo.,  397. 

*  Gray  v.  McReynolds,  65  Iowa,  461;      'Hanover  Bank  v.  Blake,  142  N.  Y., 

Woodstock  V.  Extension  Co.,  129  U.  406. 

S.,  643;   Materne  v.  Horwitz,   101 


DEPARTMENT  OF  LAW  37 

ing  B,  the  contract  is  void  because  its  purpose  is  to  commit 
an  illegal  act. 

§28.  Agreements  Furthering  Prohibited  Acts. — (a) 
Generally. — To  determine  whether  a  contract  is  prohibited 
by  statute,  the  intention  of  the  legislative  body  enacting  the 
statute  must  be  ascertained  as  definitely  as  possible.  If  the 
statute  clearly  is  intended  to  prohibit  certain  acts,  then  any 
agreement  involving  those  acts  is  illegal..  If,  however,  the 
statute  merely  imposes  a  penalty  for  doing  such  acts  there 
may  be  a  doubt  as  to  the  intention  of  the  legislature  to  pro- 
hibit the  acts  penalized.  There  are  in  such  cases  jtwo  indi- 
cations of  the  legislative  intention.  One  is  the  purpose  of 
the  penalty.  If  it  is  in  the  interest  of  public  policy,  or  to 
protect  people  from  fraud,  or  to  promote  public  safety, 
health  or  morals,  the  purpose  is  to  prohibit.  But  if  it  is  en- 
acted for  revenue  purposes  only  a  contract  in  violation  of 
the  statute  is  merely  penalized  and  is  not  prohibited.  A 
further  important  indication  is  the  recurrence  of  the  pen- 
alty. Where  the  penalty  is  visited  upon  every  breach  of 
the  statute,  it  cannot  be  doubted  that  the  act  penalized  is 
to  be  regarded  as  illegal,  and  a  contract  based  thereon  will 
be  void.  The  rule  upon  this  subject  may  be  briefly  stated 
as  follows:  Where  a  penalty  is  imposed  upon  any  partic- 
ular act,  it  may  be  assumed,  prima-facie,  that  any  contract 
violating  that  statute  is  illegal  and  void;  but  if  it  appears 
that  the  penalty  is  inflicted  for  revenue  instead  of  for  the 
protection  of  the  public,  it  is  possible  that  the  act  penal- 
ized is  not  intended  to  be  prohibited.  ^ 

(b)  Wagers.  A  wager  is  a  promise  to  transfer  monej'' 
or  property  upon  the  determination  or  ascertainment  of  an 
uncertain  event.  An  event  may  be  uncertain  because  it  has 
yet  to  occur,  or  because  its  outcome  is  not  known  by  the  par- 
ties. In  the  latter  case  the  uncertainty  exists  not  in  the 
fact  itself,  but  in  the  minds  of  the  parties.  It  is  some- 
times difficult  to  distinguish  a  wager  from  a  condition.  For 
instance :  A  gave  his  note  in  payment  of  land,  promising  to 
pay  $900  if  cotton  should  be  8  cents  a  pound  by  the  first  of 
October,  and  $500  if  it  should  not.    The  coiu-t  held  that  the 

*  Sandage  v.  Mfg.  Co.,  142  Ind.,  148;  101  Iowa,  173;  Bisbee  v.  McAllen, 

Bowditch   V.     Insurance     Co.,     148  39  Minn.,  143;   Brown  v.   Duncan, 

Mass.,    298;    McKeever  v.    Beacon,  10  B.  &  C,  93. 


38         AMERICAN  EXTENSION  UNIVEESITY 

agreement  was  not  a  bet  on  the  price  of  cotton  inasmuch 
as  the  parties  had  an  interest  in  the  contingency,  and  said 
"The  defendant  purchased  the  cotton  at  the  lowest  price, 
unconditionally,  but  agreed  to  pay  a  larger  sum  if  the  value 
should  be  enhanced  by  the  increased  value  of  its  product."  ® 
The  mere  fact  that  a  contract  is  a  wager  does  not  make 
it  invalid,  i  It  is  only  certain  contracts  of  that  kind  that  are 
prohibited.  For  example,  contracts  of  insurance  are  wager- 
ing contracts ;  but  they  are  upheld.  The  man  who  bets 
against  a  horse  in  a  race  is  simply  in  the  same  position  as  a 
man  who  bets  upon  the  safety  of  a  building  from  fire.  '  The 
law  forbids  a  party  to  make  a  contract  of  insurance  unless 
he  has  an  insurable  interest.  Therefore  contracts  in  viola- 
tion of  this  rule  are  sometimes  called  wagers  while  contracts 
compljring  with  it  are  called  contracts  of  indemnity^;  How- 
ever, both  are,  strictly  speaking,  wagering  contracts,  the 
only  distinction  between  them  is  that  one  is  not  permitted  by 
law,  while  the  other  is.  The  discussion  of  what  is  an  in- 
surable interest  must  be  left  for  the  chapter  on  insuranc'e. 
Agreements  for  the  sale  of  grain  or  stocks  are  gambling 
contracts  if  the  parties  do  not  intend  an  actual  delivery, 
but  agree,  instead,  that  at  the  time  fixed  for  delivery,  they 
will  settle  by  one  paying  the  other  the  difference  between 
the  market  price  at  that  time  and  the  price  agreed  upon. 
These  transactions  are  nothing  more  than  bets  on  the  fu- 
ture price  of  certain  articles  and.  are  illegal,  generally, 
without  reference  to  any  statute.  (The  intention  to  wager 
must  exist  in  the  minds  of  both  parties.^  If  one  has  in  mind 
a  bona-fide  sale,  he  may  enforce  the  contract,  although  the 
other  party  has  in  mind  only  a  wager.  It  is  immaterial 
whether  the  seller  is  in  possession  of  the  article  sold  at  the 
time  the  agreement  is  made. 

Clf,  in  a  formal  contract  for  the  purchase  and  sale  of 
merchandise  to  be  delivered  in  the  future  at  a  fixed  price, 
it  is  actually  the  agreement  of  the  parties  that  the  merchan- 
dise shaU  not  be  delivered  and  the  price  paid,  but  that, 
when  the  stipulated  time  for  performance  arrives,  a  set- 
tlement shall  be  made  by  a  pajonent  in  money  of  the  dif- 
ference between  the  contract  price  and  the  market  price 
of  the  merchandise  at  that  time,  this  agreement  makes  the 

•Ferguson  v.  Coleman,  3  Rich.,  Law   (S.  C.)  99. 


DEPARTMENT  OF  LAW  39 

contract  a  wagering  contract.  If,  however,  it  is  agreed  by 
the  parties  that  the  contract  shall  be  performed  according 
to  its  terms  if  either  party  requires  it,  and  that  either  party 
shall  have  a  right  to  require  it,  the  contract  does  not  be- 
come a  wagering  contract,  simply  because  one  or  both  of 
the  parties  may  intend,  when  the  time  for  performance 
arrives,  not  to  require  performance,  but  to  substitute 
therefor  a  settlement  by  the  payment  of  the  difference  be- 
tween the  contract  price  and  the  market  price  at  that  time. 
Such  an  intention  is  immaterial,  except  so  far  as  it  is  made 
a  part  of  the  contract  itself.  "To  constitute  a  wagering 
contract,  it  is  sufficient,  whatever  may  be  the  form  of  the 
contract,  that  both  parties  understand  and  intend  that  one 
party  shall  not  be  bound  to  deliver  the  merchandise,  nor  the 
other  to  receive  it  and  to  pay  the  price,  but  the  settlement 
shall  be  made  by  a  payment  of  the  difference  in  price."  ^^ 

(c)  Usury. — ^As  illustrations  of  objects  illegal  by  rea- 
son of  positive  law,  a  great  number  of  particular  agree- 
ments may  be  named.  At  common  law,  a  man  might  con- 
tract for  any  rate  of  interest  that  the  borrower  might  be 
willing  to  give ;  but  in  order  to  protect  borrowers  from  ex- 
tortion, most  of  the  states  have  enacted  laws  which  pre- 
scribe a  maximum  legal  rate  of  interest.  Charging  in  ex- 
cess of  such  maximum  rate  is  usury.  The  penalty  for  vio- 
lating these  statutes  varies  in  different  states.  In  some, 
only  the  excess  of  interest  over  the  legal  rate  is  forfeited. 
In  others,  the  entire  interest;  again  three  times  the  inter- 
est; and  in  still  others  the  whole  debt  is  forfeited.  It  has 
been  said  that  in  order  to  constitute  usury,  there  must  be 
a  lending  of  actual  money  with  a  provision  for  its  return, 
an  agreement  for  a  greater  interest  than  the  legal  rate,  and 
an  intention  to  accept  such  excessive  interest.  ^^ 

A  loan  of  chattels  for  an  amount  more  than  the  legal 
rate  of  interest  on  their  value  is  not  usury.  Neither  is  the 
purchase  of  a  note  after  delivery,  at  a  discount  greater  than 
the  legal  rate  of  interest,  as  there  is  no  loan  of  actual  money 
in  either  of  these  cases.  " 

However  where  paper  is  discounted  merely  to  disguise 

^"Harvey  v.  Merrill,  150  Mass.,  1.  447;   Dickerman  v.   Day,  31  Iowa, 

*^  Balfour  v.  Davis,  14  Ore.,  47.  444;      Truby     v.     Mosgrove,     118 

"Holmes  v.  Bank,     53  Minn.,     350;  Pa.,  89. 
Chase  v.    Farout,    25    N.   Y.,   Sup., 


40         AMERICAN  EXTENSION  UNIVERSITY 

a  loan,  the  decision  of  the  courts  may  be  different.  ^^  If  a 
person  agrees  to  pay  a  sum  in  excess  of  lawful  interest  if 
he  does  not  repay  the  principle  when  it  is  due,  the  excess 
amount  may  be  regarded  as  a  penalty  since  it  may  be 
avoided  by  prompt  payment.  ^^ 

Compound  interest  is  interest  on  interest.  Charging 
such  interest  is,  according  to  the  majority  of  courts,  not  re- 
garded as  usury.  ^^  Some  courts,  however,  forbid  compound 
interest  on  the  ground  that  it  is  usurious.  ^^  Provision  in  a 
note  for  attorney's  fee  in  case  of  collection  by  suit  is  not 
usury.  ^^  j 

Nor  is  the  payment  of  a  broker's  commission,  or  other 
expense  for  procuring  a  loan.  ^^  According  to  some  courts, 
such  a  charge  may  be  made  by  the  lender  himself.  How- 
ever, the  exaction  of  a  bonus  by  a  lender  may  constitute 
usury.  ^^  The  payment  of  a  bonus  by  a  borrower  to  either 
his  own  or  the  lender's  agent  is  not  usury  as  it  is  not  part  of 
the  sum  paid  for  the  use  of  the  money.  ^^  Usury  will  taint 
a  note  given  in  renewal  of  a  usurious  note  though  the  new 
paper  calls  for  only  the  legal  rate  of  interest.  ^^ 

(d)  Sunday  Contracts.— At  common  law  there  was  no 
distinction  between  contracts  made  on  Sunday  and  those 
made  on  any  other  day.  ^  Most  states,  however,  now  have 
statutes  upon  the  subject.  The  scope  of  these  statutes 
varies  with  their  language.  In  some  states,  all  Sunday 
labor  and  business  is  prohibited,  while  in  others  only  servile 
labor,  and  work  pertaining  to  a  man's  occupation.  All  such 
statutes  except,  from  their  operation,  acts  of  charity  or  of 
necessity.  ['Necessity  in  this  instance  means  the  propriety 
of  the  work  done  under  the  circumstances  of  the  case.  ^*) 
When  the  terms  of  a  contract  are  decided  on  Sunday,  but 
the  contract  itself  is  not  made  until  a  week  day,  the  law  is 
not  violated.  1  A  promissory  note  signed  on  Sunda}^  and  de- 
livered the  following  day,  is  valid,  since  it  does  not  become 
a  binding  legal  contract  until  delivery.  "^ }  There  is  consid- 

"Truby   v.    Mosgrove,    118    Pa.,    89;  "  Fowler  v.  Trust  Co.,  141  U.  S.,  411; 

Claflin  V.  Boorum,  122  N.  Y.,  385.  Merck  v.  Mtg.  Co.,  79  Ga.,  213. 

"Fisher   v.    Anderson,    25    Iowa,    28;  "  Ammondson  v.  Ryan,  111  111.,  506. 

Ins.  Co.  V.  Westerhoff,  58  Neb.,  379.  =»  Harris  v.  Wicks,  28  Wis.,  198. 

"Gilmore  v.    Bissell,    124    111.,    488;  "  Grieser  v.  Hall,  56  Minn.,  155. 

Brown  v.  Bank,  86  Iowa,  527.  **  Cottrell  v.  Southwick,  71  Iowa,  50. 

"Young  V.  Hill,  67  N.  Y.,  162.  «  Love  v.  Wells,  25  Ind.,  503. 

"Dorsey  v.  Wolff,  142  111.,  589.  "Bell  v.  Mahin,  69  Iowa,  408. 


DEPARTMENT  OF  LAW  41 

erable  conflict  as  to  whether  a  contract  entered  into  on  Sun- 
day can  be  made  valid  by  subsequent  ratification.  Some 
courts  take  the  position  that  there  is  no  contract  to  ratify; 
and  this  appears  to  be  the  prevailing  rule.  However,  when 
the  ratification  consists  of  a  subsequent  delivery  of  goods, 
there  is  a  tendency  to  take  such  cases  out  of  the  rule  and 
hold  the  parties  liable  on  the  implied  promise  arising  from 
the  acceptance  of  the  goods.  ^ 

(e).  Business  Occupation  Restrictions. — There  are 
many  statutes  requiring  certain  business  and  professional 
men  to  procure  licenses,  or  certificates,  before  engaging  in 
their  occupations.  The  purpose  of  these  statutes  is  to  pro- 
tect the  public  against  incompetence  on  the  part  of  profes- 
sional men,  and  against  the  sale  of  spurious  and  adulter- 
ated articles,  and  also  to  restrict  certain  classes  of  busi- 
ness. /Teachers,  physicians,  lawyers,  brokers,  convey- 
ancers, innkeepers,  plumbers,  auctioneers,  pedlars,  etc., 
are  examples  of  the  classes  of  callings  coming  within  the 
statutes  referred  to. '  Any  such  person  not  complying  with 
these  statutes  cannot  recover  for  services  rendered  in  his 
vocation. 

A^ere  the  sale  of  intoxicating  liquor  is  prohibited  by 
statute,  an  agreement  to  sell  or  the  sale  of  such  goods, 
is  invalid.  They  are  invalid  also  when  the  statute  is  not 
prohibitory,  but  merely  imposes  a  penalty  for  conducting 
the  business  without  a  license.  (The  prevailing  holding  of 
the  courts  is  that  any  such  sale  without  a  license  is  illegal^) 
and  accordingly  that  recovery  cannot  be  had  by  law  for 
money  due  on  such  sales.  Associated  with  these  statutes 
are  others  which  regulate  the  management  of  places  where 
certain  businesses  are  done.  For  example,  where  there  is  a 
statute  prohibiting  the  conducting  of  a  billiard  or  pool  hall 
in  connection  with  a  saloon,  a  carpenter  cannot  recover  for 
services  in  constructing  furniture  for  such  a  hall.  ^^ 

§29.  Agreements  Contrary  to  Public  Policy. — Such 
contracts  are  void  and  illegal  although  the  acts  intended 
may  not  be  in  violation  of  any  statute  or  of  the  common 
law.  It  is  impossible  to  classify  definitely  the  agreements 
that  may  be  contrary  to  public  policy,  consequently  the  test 
of   public    policy   must    be    applied   to    each    case    indi- 

**  Spurgeon  v.  McElwaIn,  6  Ohio,  442.a 


42         AMERICAN  EXTENSION  UNIVERSITY 

vidually.    There  are,  however,  several  groups  into  which 
such  agreements  may  be  readily  divided. 

(a)  Affecting  Public  Service. — ^Inasmuch  as  the  pub- 
lic has  an  interest  in  the  execution,  by  public  officers,  of 
their  duties,  and  is  injured  by  any  agreement  tending  to  in- 
terfere with  an  impartial  performance  of  such  duties,  any 
such  agreements  are  contrary  to  public  policy  and  there- 
fore, illegal  and  void.  Greenhood  in  his  work  on  "Public 
Policy"  says:  /"Any  contract  to  appoint  one  to  a  public  of- 
fice, or  involving  the  sale  of  a  public  or  quasi-public  of- 
fice, or  to  do  anything  in  consideration  of  the  promisee  ex- 
changing office  with,  or  securing  an  office  for,  the  promissor, 
or  recommending  him  for  such  office,  or  resigning  any  office, 
is  void.'M  This  principle  includes  the  assignment  by  public 
officers,  of  their  unearned  salaries.  As  Lord  Abinger  long 
ago  said:  ''"It  is  fit  that  the  public  servants  should  retain 
the  means  of  a  decent  subsistence  and  not  be  exposed  to  the 
temptations  of  poverty. ' '  ^^J  An  officer  may,  however,  assign 
his  salary  after  it  is  due ;  but  an  assignment  before  it  is  du6 
has  been  held  void  on  the  ground  that  one  who  has  assigned 
his  unearned  salary  is  apt  to  be  inefficient  in  the  perform^ 
ance  of  his  duties. 

(b)  Lobbying  and  Kindred  Contracts. — ^A  lobbying 
contract  is  an  agreement  for  service,  upon  a  consideration, 
in  securing  legislative  action  by  means  of  personal  influence 
upon  legislators.  ,'  Such  a  contract  is  plainly  contrary  to  pub- 
lic policy  and  void.  On  the  same  principle,  any  promise  con- 
tingent upon  certain  legislative  action  would  be  void  inas- 
much as  it  might  be  an  incentive  to  the  exercise  of  influence 
upon  the  legislators.  For  example,  an  agreement  in  con- 
sideration of  $15,000  to  bring  such  influence  to  bear  upon 
a  legislature  as  to  cause  the  passage  of  a  railroad  charter 
granting  certain  privileges  is  void.  ^^  However,  lobbying 
contracts  must  be  distinguished  from  contracts  for  purely 
personal  services  in  connection  with  legislative  work  such 
as  presenting  evidence,  preparing  papers,  and  submitting 
arguments  before  legislative  committees  and  the  like.  This 
class  of  contracts  is  valid  and  legally  is  no  more  objection- 
able than  those  for  professional  services  rendered  in  any 

="  Foster  v.  Wells,  8  M.  &  W.,  149.  U.  S.,  314;  Houlton   v.    Dunn,    60 

"Marshall  v.  B.  &  O.  R.  R.  Co.,  57  Minn.,  26. 


DEPARTMENT  OF  LAW  43 

court.  A  contract  to  work  for  the  passage  of  certain  bills 
"by  a  legislature,  openly  and  without  concealment  of  pur- 
pose or  interest,  has  been  held  valid,  -^  as  has  also  an  agree- 
ment to  make  a  public  argument  before  a  legislature  or  one 
of  its  committees.  -®  , 

With  regard  to  contracts  which  contemplate  procuring 
contracts  from  departments  of  government,  there  is  some 
difference  of  opinion.  Some  courts  hold  that  such  an  agree- 
ment is  illegal  on  account  of  its  tendency  to  corrupt  gov- 
ernment ;  others,  that  although  such  an  agreement  may  pro- 
vide for  a  compensation  for  services  in  procuring  such  a  con- 
tj'act,  it  becomes  illegal  only  when  corrupt  means  are  em- 
ployed thereunder.  Agreements  for  services  in  procuring 
administrative  action  may  be  purely  professional,  as  in  the 
case  of  contracts  to  render  services  before  legislative  com- 
mittees. Contracts  to  influence  municipal  and  quasi-public 
corporations  in  locating  their  improvements,  or  in  the  per- 
formance of  other  corporate  acts,  fall  within  this  class  when 
they  interfere  with  the  duties  of  such  corporations  to  the 
public.  ^^  Such  contracts  are  generally  held  valid  when  they 
do  not  restrict  the  company  in  locating  similar  improve- 
ments at  such  other  places  as  the  public  needs  maj^ 
require.^  ^ 

(c)  Affecting  Public  Justice. — Another  group  of 
agreements,  contrary  to  public  policy,  includes  such  agree- 
ments as  tend  to  pervert  or  obstruct  public  justice.  Any 
agreement  to  influence  the  testimony  of  a  witness,  whether 
by  making  his  compensation  contingent  on  the  outcome  of 
the  suit,  or  by  suppressing  part  of  his  testimony,  is  illegal 
and  void,  regardless  of  any  lack  of  bad  faith  of  the  parties 
thereto,  or  of  the  fact  that  no  injury  has  resulted  thereby. 
The  most  common  example  of  such  agreements  are  those  de- 
signed to  stifle  criminal  prosecutions.  Such  contracts  are 
void,  both  on  account  of  being  against  public  policy  and  be- 
cause they  themselves  constitute  a  crime.  However,  this 
rule  must  be  taken  subject  to  this  exception,  that  where 
civil  and  criminal  remedies  coexist,  the  offense  may  be  com- 
promised when  the  injured  party  can  recover  damages.    If, 

="*  Miles  V.  Thorne,  38  Cal.,  335.  Wash.,   42. 

==•  Bryan  v.  Reynolds,  5  Wis.,  200.  "Louisville  etc  R.  Co.,  v.  Summer  106 

"^Doam  V.  Chicago  City  Ry.  Co.,  160  Ind.,  55;   Texas  etc  R.  Co.  v.  Ro- 

m.,    22;    Reed    v.     Johnson,     27  barts,  60  Tex.,  545. 


44         AMERICAN  EXTENSION  UNIVERSITY 

however,  the  offense  is  of  a  public  nature,  no  valid  agree- 
ment can  be  founded  on  a  promise  to  stifle  prosecution 
therefor. 

/It  is  also  contrary  to  public  policy  to  make  an  agree- 
ment tending  to  encourage  litigation. ,  Such  agreements  are 
usually  known  as  maintenance  or  chalnperty.  Maintenance 
is  the  encouragement  and  maintenance  of  litigation  by  one 
who  has  no  personal  relation  thereto  or  interest  therein,  by 
aiding  either  party  in  its  prosecution  or  defense.  This  defi- 
nition must  be  qualified  by  the  statement  that  the  courts  do 
not  usually  hold  such  a  contract  void  unless  it  appears  to  be 
made  to  encourage  actions  or  defenses  which  ought  not  to 
be  made.  Assistance  rendered  because  of  a  bona-fide  inter- 
est or  relationship  is  not  illegal.  Champerty  is  the  main- 
tenance of  a  suit  for  a  share  of  the  proceeds  thereof.  The 
common  law  doctrine  on  the  illegality  of  such  agreements  is 
not  now  recognized  to  its  full  extent  in  all  jurisdictions. 

(d)  In  Restraint  of  Trade. — Contracts  restraining  one 
in  the  transaction  of  his  business  or  trade,  are  contrary  to 
public  policy  if  the  restraint  thereby  required,  is  unreason- 
able; but  otherwise  if  the  restraint  is  reasonable.  The  de- 
cisions holding  such  agreements  void  are  based  upon  a  num- 
ber of  reasons.  The  injury  to  the  party  restrained  in  the 
conduct  of  his  business;  the  loss  to  the  public  of  the  ser- 
vices of  men  in  business  and  professions;  the  prevention  of 
competition,  and  the  encouragement  of  monopoly,  are  the 
principle  ones.  The  important  question  in  connection  with 
such  agreements  is  what  amounts  to  a  reasonable  re- 
straint *?  ^^  A  restraint  which  is  unlimited  as  to  territory 
has  generally  been  held  void  though  some  courts  insist  that 
it  is  valid  if  the  circumstances  of  the  contract  are  such  as  to 
make  it  appear  reasonable.  ^^  /In  determining  whether  a  re- 
straint is  reasonable  the  court  will  inquire  as  to  the  protec- 
tion required  by  the  party  in  whose  favor  it  is  made,  and  also 
as  to  its  interference  with  the  interests  of  the  public.  It  is 
not  necessary  for  a  tradesman  whose  business  is  limited  to 
his  own  city,  when  selling  same  to  bind  himself  not  to  engage 
in  the  same  business  anywhere  within  the  state;  and  in 
many  cases,  an  agreement  not  to  engage  in  such  business 

^McCurry  v.  Gibson,  108  Ala.,  451;      "'Diamond  Match  Co.,  v.  Roeber,  106 
Gibbs  V.  Consolidated  Gas  Co.,  130  N.  Y.,  473. 

U.  S.,  369. 


DEPAETMENT  OF  LAW  45 

again  in  the  same  city  would  be  deemed  unreasonable.  It  is 
necessary  that  the  terms  of  the  restraint  protect  the  party 
in  whose  favor  it  is  made,  if  possible.  Anything  beyond 
fhat  is  unreasonable  and  void  for  the  reason  that  it  tends  to 
injure  the  public. 

§30.  Effect  of  Illegality.— (a)  Generally.— The  ef- 
fect of  illegality  upon  the  validity  of  a  contract  varies  ac- 
cording to  certain  circumstances.  It  may  affect  the  entire 
contract,  or  only  a  portion  of  it,  and  the  legal  and  illegal 
portions  may  or  may  not  be  separable.  The  contract  itself 
may  have  for  its  direct  object  the  committing  of  an  illegal 
act,  or  its  direct  object  may  be  wholly  lawful  though  the  con- 
tract itself  will  further  an  illegal  purpose.  Both  parties 
may  be  fully  aware  of  the  illegal  effect  of  their  agreement ; 
either  or  both  of  them  may  be  ignorant  as  to  this,  or  one 
party  may  have  knowledge  of  the  unlawful  intention  of  the 
other,  and  at  the  same  time  be  free  from  any  purpose  of  fur- 
thering this  intention.  As  in  the  foregoing  divisions  of  this 
subject,  any  outline  offered  will  be  for  convenience  of  dis- 
cussion, and  not  because  the  subject  is  capable  of  accurate 
subdivision.  , 

(b)  Divisibility  of  Legal  From  Illegal  Consideration. 
— f-Whenever  it  is  possible,  the  legal  promises  or  considera- 
tions of  a  contract  are  to  be  separated  from  those  which  are 
illegal.  Where  the  contract  is  one  indivisible  agreement, 
the  illegality  of  any  part  of  it  will  render  the  whole  under- 
taking void.  If,  however,  the  legal  can  be  separated  from 
the  illegal,  and  enforced  without  injustice,  so  much  of  the 
agreement  will  stand.  :  The  great  difficulty  in  such  cases  lies 
in  determining  to  what  extent  the  parts  of  the  agreement 
are  separable.  ^*.  Where  a  number  of  considerations  are 
given  for  the  same  promise,  and  some  of  them  are  illegal, 
the  entire  contract  must  be  void,  for  it  is  impossible  to  say 
to  what  extent  each  consideration  induced  the  promise.  ^^ 
(When  a  separate  promise  for  each  of  several  acts,  or  a  sepa- 
rate price  for  each  separate  article  is  named,  if  part  only  of 
the  transaction  is  illegal,  only  that  part  of  the  agreement 
will  be  affected. 

(c)  Direct  and  Remote  Illegality. — ^Where  the  direct 

"Handy  v.  Pub.  Co.,  41  Minn.,  188;  639. 

McMullen  v.  Hoffman,    174    U.    S.,      "King  v.  King,   63   Ohio  St.,   363. 


46         AMERICAN  EXTENSION  UNIVERSITY 

object  of  a  contract  is  an  illegal  act,  the  contract  is  void  irre- 
spective of  the  knowledge  or  intention  of  the  parties,  for  the 
reason  that  ignorance  of  the  law  excuses  no  one.  (  Where 
the  direct  object  of  the  contract  is  lawful,  but  the  intention 
of  both  the  parties  is  unlawful,  the  agreement  is  void. )  For 
example :  (When  a  party  sells  goods  which  he  knows  are  to 
be  used  unlawfully,  if  he  does  any  act  in  furtherance  of  the 
iUegal  design,  his  contract  of  sale  will  be  void.  ^  If,  however, 
he  merely  knows  of  the  unlawful  purpose  without  further- 
ing it,  the  contract  will  be  valid.  The  same  rule  prevails 
where  money  instead  of  goods  is  furnished  and  subsequently 
used  unlawfully.  Where  the  illegal  act  is  completed,  how- 
ever, it  has  been  held  not  to  avoid  the  promise.  For  exam- 
ple, in  Pyke  's  case,  the  court  held  that  money  loaned  to  pay 
lost  bets  could  be  recovered,  as  "the  illegal  act  had  been 
carried  out  before  the  money  was  lent,"  and  that  case  was 
an  entirely  different  thing  from  a  loan  of  money  to  enable  a 
man  to  make  a  bet.  ^^  Where  unlawful  intention  is  in  the 
mind  of  one  party  only,  the  innocent  party  may,  at  his  op- 
tion, avoid  the  agreement  or  enforce  it.  An  example  of  this 
exists  where  an  agreement  is  made  involving  a  future  de- 
livery in  which  one  party  intends  a  bona-fide  sale  and  the 
other  only  a  speculation  in  prices. 

(d)  Lawful  Promise  for  Illegal  Consideration. — 
Where  a  promise  has  been  given  to  pay  money  that  is  due, 
or  that  will  become  due,  upon  an  unlawful  transaction,  its 
validity  depends  largely  upon  whether  the  transaction  is 
illegal  or  merely  void.  Where  an  object  is  illegal,  a  promise 
given  in  consideration  of  it  is  based  on  an  illegal  considera- 
tion, and  this  illegality  taints  the  entire  transaction  and  ren- 
ders it  invalid.  Where  the  promise  is  in  the  form  of  a  ne- 
gotiable instrument,  a  question  also  arises  as  to  its  value  in 
the  hands  of  an  innocent  third  party.  A  negotiable  instru- 
ment given  for  an  illegal  consideration,  which  reaches  the 
hands  of  a  bona-fide  holder  for  value,  may  be  enforced  pro- 
vided that  the  contract  is  not  illegal  by  virtue  of  a  statute 
which  declares  that  such  an  instrument  so  given  shall  be 
void.  ^'  Where  in  such  a  case  it  appears  that  the  instru- 
ment was  tainted  with  illegality,  the  holder  thereof  will  be 
obliged  to  show  that  he  paid  value  for  it  and  that  he  had  no 

"•Pyke's  Case,  8  Ch.  Dlv.,  756.  ""Harper  v.  Young,  112  Pa.,  419. 


DEPARTMENT  OF  LAW  47 

knowledge  of  the  illegality.  Where,  however,  the  transac- 
tion is  void  without  the  consideration  being  illegal,  a  prom- 
ise to  pay  money  therefore  has  the  same  standing  as  if  it 
were  made  upon  no  consideration  at  all.  If  it  is  in  the 
form  of  a  negotiable  instrument,  it  may  be  enforced  by  a^ 
bona-fide  holder  for  value,  the  presumption  being  that  a 
party  in  whose  favor  the  instrument  is  endorsed  is  such  a 
holder  without  notice  of  the  lack  of  consideration.  ^^ 

^Harger  v.  Worrall,  69  N.  Y.,  317. 


QUIZZEB. 

LAWFULNESS  OF  PURPOSE. 

l-§26.    Will  courts  enforce  contracts  to  violate  the  law — 
and  why?    >  - 

2-  State  what  acts  cannot  be  made  the  basis  of  a  legal 

contract '^  A'^^'^'-  ■c=Uci-A~o-i>r-t,*>^A-i)  /^j»_  jt*-c*7- 

3-  Can  indictable  acts,  or  those  subject  to  penalties 

or  forfeitures,  or  those  otherwise  prohibited,  be 
made  the  subj  ect  of  contract  ?    '  . 

4-  How  can  unlawful  agreements  be  broadly  classi- 

fied'? 
5-§27.    What  is  the  nature  of  a  contract  agreeing  to  com- 
mit an  unlawful  offense'?  ■^JJ~s.<^sJL 

6-  Name  some  acts  not  subject  to  contract  for  this 

reason. 

7-  What  is  the  nature  of  a  contract  based  upon  a  civil 

wrong — and  illustrate. 

8-  Can  a  contract  whereby,  in  a  composition  with 

creditors,  one  receives  more  than  the  others,  be 
legally  enforced — and  why? 

9-  What  can  you  say  as  to  the  nature  of  an  agreement 

to  secure  fictitious  bids  at  an  auction?   •' 

10-  Can  one  employed  to  make  such  bids,  legally  re- 

cover the  agreed  pay  therefor — and  why?  \i!'cMs,S'' 

11-  What  effect  upon  the  bid  of  the  successful  bidder 

at  an  auction,  has  fictitious  bidding? 

12-  State  fully  the  distinction  between  fraud  and  ille- 

gality in  such  matters. 


48         AMERICAN  EXTENSION  UNIVERSITY 

13- §28.  How  is  it  ascertained  whether  a  contract  is  prohib- 
ited by  statute  *? 

14- (a)  Can  contracts  involving  prohibited  acts  be  en- 
forced? 

15-  Can  contracts  involving  acts  for  which  a  statutory 

penalty  is  imposed  be  enforced  ■? 

16-  How  is  a  legislative  intention  covering  these  two 

classes  of  acts  determined — state  fully'? 

17-  State  accurately  the  rule  covering  this  subject. 
18- (b)      Define  a  wager. 

19-  Can  a  wager  be  readily  distinguished  always  from 

a  condition  in  a  contract — illustrate. 

20-  Does  the  mere  fact  that  a  contract  is  a  wager  make 

it  invalid'? 

21-  Name  some  contracts  that  are  in  fact  wagers  that 

are  not  illegal  for  that  reason.  ; 

22-  When  are  contracts  for  the  sale  of  grain  or  stock 

illegal — and  why  •?  -  -       »     ^.j'v,.^vs> 

23-  What  effect  upon  a  wagering  contract  has  the  fact  ^  | 

that  one  of  the  parties  intended  a  bona-fide  sale  1  -^ 

24-  What  factor  in  a  contract  covering  merchandise  to 

be  delivered  at  a  future  date  makes  it  a  wager- 
ing contract — and  what  obviates  this? 

25-  What  is  sufficient  in  a  contract  to  constitute  it  one 

of  wager? 
26- (c)      What  limit,  at  common  law,  was  there  upon  the 
interest  rate  chargeable  ?       • 

27-  Has  the  old  rule  been  changed — if  so,  why^and  to 

what  extent  ?   '  -^ .  v>^^  "^  <3^  l-y-  (f-r^-^  • 

28-  What  is  charging  interest  above  the  legal  rate 

called?       .  - 

29-  Is  there  any  penalty  for  such  over-charge  ?  '^^^ 

30-  What  is  necessary  to  constitute  usury? 

31-  Is  a  loan  of  chattels  at  a  rate  more  than  the  legal 

interest  on  their  value  would  be,  usury?  M  o . 

32-  Is  the  purchase  of  a  note  at  a  discount  greater  than 

the  legal  rate,  usury — and  why  ? 

33-  What  is  the  effect  where  commercial  paper  is  dis- 

counted at  such  rate  merely  to  disguise  the  ex- 
cess interest? 

34-  Define  compound  interest,  and  is  charging  such  in- 

terest usury?   .  - 


DEPARTMENT  OF  LAW  49 

35-  Is  your  answer  to  the  last  part  of  the  foregoing 

question  true  in  all  states'? 

36-  Is  a  provision  for  an  attorney's  fee  in  a  note,  in 

case  of  suit  thereon,  usury"?  '^l  o 

37-  Is  the  commission  charged  by  a  broker  for  obtain- 

ing a  loan  for  another,  usury? 

38-  Does  the  exaction  of  a  bonus  by  a  lender  constitute 

usury?  '  -'. 

39-  Is  payment  of  a  bonus  by  a  borrower,  to  his  own 

or  the  lender's  agent,  usury ?*vv/^ 

40-  Will  usury  taint  a  note  at  legal  interest  given  in 

renewal  of  a  usurious  note  % 
41- (d)      What    distinction    at    common    law    was    made 
between  contracts  made  on  Sunday  and  those 
made  on  other  days?  ..        .:     - 

42-  How  is  this  subject  regulated  at  present?  ^'  ^liyLL^^JL 

43-  State  some  statutory  differences,  as  to  contracts 

prohibited  on  Sunday. 

44-  What  contracts  are  excepted  from  the  operation  of 

Sunday  law  statutes?       -     -  ■  '     . 

45-  Where  the  terms  of  a  contract  are  decided  on  Sun- 

day, but  the  contract  is  not  actually  made  until 
a  week  day,  is  such  contract  valid?    , 

46-  Is  a  promissory  note  signed  on  Sunday  and  deliv- 

ered the  following  day  valid — and  why? 

47-  Can  a  contract  made  on  Sunday  be  validated  by 

subsequent  ratification — state  fully? 
48- (e)     What  can  you  say  concerning  statutes  restricting 
business  occupations? 

49-  What  classes  of  persons,  generally,  come  within 

such  restrictions?         i'  --  ^  '""!''' " 

50-  Can  persons  not  complying  with  such  statutes  le- 

gally recover  upon  contracts  made  without  com- 
plying therewith  %.-  - 

51-  Is  an  agreement  to  sell  intoxicating  liquor,  where 

its  sale  is  prohibited  by  statute,  or  where  the 
statute  imposes  a  penalty  for  conducting  such 
business  without  license,  valid?         ^   ' 
52-§29.    What  can  you  say  as  to  the  legality  of  contracts 
contrary  to  public  policy?  .>i'vi(iLc  ftjL 


50         AMERICAN  EXTENSION  UNIVERSITY 

53- (a)  Are  contracts  tending  to  interfere  with  the  impar- 
tial performances  by  public  officres,  of  their  du- 
ties, valid? 

54-  State  some  types  of  contracts  of  this  character 

which  are  invalid.     .      \vvw>je^yV  ^l  ooio-n^  itJ^jL,^^-*-^ 

55- (b)     Define  a  lobbying  contract.  *  ^ 

56-  Are  such  contracts  legal — and  why^/^^^r 

57-  •       What  contracts  designed  to  influence  legislation  ^ 

are,  and  what  are  not,  legal  *?: 

58-  Are  contracts  to  secure  administrative  action  in 

public  offices  valid? 

59-  Is  a  contract  to  influence  a  municipal,  or  a  quasi 

public  corporation  contract  valid? 
60(c)     Are  contracts  tending  to  pervert  or  obstruct  public 
justice  valid?    /  • 

61-  What  contracts  with  witnesses  are,  and  what  are 

not,  valid? 

62-  Is  a  contract  to  stifle  criminal  prosecution  valid  ?^'^ 

What  exceptions  if  any,  are  there  in  this  matter? 

63-  Is  a  contract  tending  to  encourage  litigation  valid 

— and  why?    .     s 

64-  Define  the  term  ''maintenance,"  and  are  contracts 

therefor  valid? 

65-  What  is  "champerty'^;  and  are  contracts  therefor 

legal? 
66- (d)     What  contracts  in  restraint  of  trade  are  legal;  and 
what  are  illegal? 

67-  State  the  reason  upon  which  such  agreements  are 

held  to  be  void. 

68-  What  measure  of  restraint  of  trade  in  a  contract 

will  be  held  valid? 

69-  In  determining  this  question,  what  inquiry  will  the 

court  make  ? 

70-  Is  a  restraint,  unlimited  as  to  territory,  void? 

71-  Can  a  contract  not  to  enter  into  business  anywhere 

within  a  named  state  be  enforced — and  why? 

72-  What  is  the  limit  of  restraint  in  behalf  of  the  party 

benefited  thereby  which  will  be  upheld? 

73-§30.  What  is  the  effect  of  illegality  upon  a  contract 
(a)  and  is  this  effect  always  uniform? 

74-  Distinguish  the  various  limits  of  the  effect  of  ille- 

gality in  contracts. 


DEPARTMENT  OF  LAW  51 

75- (b)  Can  the  legal  consideration  be  divided  from  the  il- 
legal consideration  in  contracts  where  both 
appear?      ~ 

76-  State  fully  when  such  separation  can  and  cannot 

be  had. 

77- (c)     Where  the  direct  object  of  a  contract  is  illegal  what     ^ 
effect  does  this  have  on  the  contract?  ^^^  l.jiS^'^^ 

78-  Same,  in  cases  where  the  direct  object  is  lawful  but 

the  intention  of  the  parties  is  unlawful?      -  '-' 

79-  Can  a  party  collect  for  goods  sold  which  he  then 

knew  were  to  be  used  unlawfully?  y^^- 

80-  Can  money  loaned,  knowing  it  is  to  be  used  in  gam- 

bling, be  recovered  legally — and  why?     .  c 

81-  Can  money  loaned  to  pay  a  gambling  debt  already 

incurred  be  so  recovered?  :]>;^ 

82-  (d)     How  is  the  validity  of  a  promise  to  pay  money  upon     ^ 

an  unlawful  transaction  determined?  '  :  .;  •. .      -r«>^-£-^ 

83-  Where  such  promise  is  in  the  form  of  negotiable 

paper,  what  additional  question  arises? 

84-  Wlien  and  when  not  can  the  innocent  holder  of 

negotiable  paper  given  for  an  illegal  considera- 
tion collect  same  ? 

85-  What  is  the  rule  where  a  transaction  is  void  but 

the  consideration  thereof  is  legal? 


52         AMERICAN  EXTENSION  UNIVERSITY 

LESSON  5.— 

CHAPTER  V. 

OFFER  AND  ACCEPTANCE 

§31.  Mutuality  of — Expressed  by  "Words. 

32.  Same — Expressed  by  Conduct. 

3  3.  Same — Illustrations. 

34.  Offer  Must   be  Known  by  Acceptor. 

35.  Offers  Partly  Communicated. 

36.  Acceptance  Must  be  Communicated. 

37.  Acceptance  Must  Coincide  With  Offer. 

38.  Offer  and  Acceptance  by  Mail. 

39.  When  Acceptance   is   Complete. 

40.  Acceptance  Must  Not  Modify  Offer. 

41.  Conditional  Acceptances. 

42.  Ancilliary   Matters  in  Acceptance. 

43.  Lapsing  of  Offer. 

44.  When  Offer  is  Revocable. 

45.  Notice  of  Revocation  Must  be  Communicated. 

46.  "Refusals,"    and    Their    Revocation. 

47.  By  Whom  Offers  Must  be  Accepted. 

48.  Auctions. 

49.  Public  Offers  and  Bids. 

50.  Offer  Must  Concern  Contractual  Relations. 

51.  Conflict  of  Laws.  ' 

§31.    Mutuality    of — Expressed    by    Words.-/Every 

contract  reduced  to  its  actual  inception  arises  from  the  ac- 
ceptance of  an  offer  .J  Every  expression  of  mutual  intention 
is  reached  by  one  party  making  an  offer  and  the  other  party 
accepting  it;  the  legal  result  being  an  obligation,  or  legal  tie, 
binding  the  parties  to  the  performance  of  the  conditions 
thus  agreed  to.  Such  an  expression  of  mutual  intention 
can  usually  be  reduced  to  the  form  of  a  simple  question  and 
answer.  For  instance:  A  says,  "I  will  sell  my  horse  for 
$50.,  and  B  says,  "I  will  take  him."  Or  B  says,  "I  will  give 
you  $50  for  your  horse.  Will  you  take  it?"  and  A  says,  *'I 
will."  To  the  same  effect,  legally,  although  in  a  different 
manner,  the  act  of  a  merchant  in  displaying  his  goods  at  a 
stated  price,  and  that  of  a  customer  taking  them  to  the 
wrapping  counter,  or  saying  that  he  will  take  such  goods, 
indicating  them  amount  to  an  offer  and  acceptance  and 
hence  constitutes  a  legal  contract.  /A  contract  made  under 
the  last  condition  is  sometimes  called  a  tacit  contract./ 

§32.    Same — Expressed  by  Conduct. — From  the  last 

illustration  given  it  will  be  seen  that  both  an  offer  and  its 

acceptance  may  be  made  by  conduct  instead  of  by  words. 

^Sending  goods  in  response  to  an  order  therefor  is  an  accept- 


DEPARTMENT  OF  LAW  53 

ance  by  conduct,  of  the  offer  to  buy  contained  in  the  order.) 
A  common  illustration  of  this  class  of  contracts  is  offered  by 
the  sending  of  goods  by  error  or  otherwise,  to  one  who  has 
not  ordered  them  and  their  use  or  consumption  by  the  per- 
son to  whom  they  were  delivered.  The  sending  or  delivery 
is  the  offer,  the  use  or  consumption  is  the  acceptance,  legally 
implying  a  promise  to  pay  the  market  price  therefor.J 
Again,  a  person  allows  another  to  perform  services  for  him 
under  such  circumstances  that  such  other  person  could  not 
reasonably  be  supposed  to  be  doing  the  work  for  nothing, 
the  former's  acquiesence  in  receiving  the  services,  consti- 
tutes an  acceptance  of  the  services  done,  and  he  will  be  held 
liable  to  pay  for  them.)  A  ordered  of  B  a  publication  which 
was  to  be  completed  in  twenty-four  numbers ;  he  refused  to 
accept  more  than  ten  numbers ;'it  was  held  that  A's  accept- 
ance of  the  ten  numbers  received,  created  a  promise  to  pay 
for  them,)although  he  was  not  liable  on  his  promise  to  take 
the  entire  number.  ^ 

However,  in  such  cases  in  order  to  make  a  valid  con- 
tract there  must  be  a  definite  request,  actual  or  implied,  for 
the  work  to  be  done  and  not  a  mere  inquiry  whether  the 
other  would  be  willing  to  do  it,  or  willing  to  have  it  done. 
Acceptance  of  proffered  work  or  service  constitutes  a  legal 
promise  to  pay  for  it.  /Where  silence  is  relied  upon  as  an 
acceptance,  it  must  be  such  silence  as  constitutes  an  assent) 
(H  the  nature  of  the  contract,  or  of  the  offer  is  such  that  ac- 
ceptance should  be  definitely  expressed,  either  in  spoken  or 
writing  speech,  then  acceptance  by  silence  will  not  be  sufS-  _  ^^ 
cient.~^~"  when  acceptance  is  by  conduct,  the  contract  is  im-  -^ 
plied  from  the  conduct  of  the  parties  in  contrast  to  those  in-  ' 
stances  where  the  contract  is  expressed  by  words. 

§36.  Same — Illustrations. — An  offer  and  its  accept- 
ance may  be  made  in  various  forms.  The  presence  of  a 
street  car  on  the  street  is  an  offer  by  the  company  to  carry 
passengers,  and  when  a  person  enters  the  car,  he  accepts  the 
offer  and  promises  to  pay  the  fare.  This  is  an  offer  of  an 
act  for  a  promise.  If  a  person  has  lost  property  and  offers 
a  reward  for  its  return,  it  is  a  promise  offered  for  an  act.  If 
A  promises  to  B  a  hundred  dollars  for  services  which  B 
promises  to  perform,  a  contract  arises  from  the  offer  of  the 

^  Fogg  V.  Portsmouth  Athenaeum,  44  N.  H.,  115. 


54         AMERICAN  EXTENSION  UNIVERSITY 

promise  and  the  giving  of  a  promise  in  return.     This  is  a 
case  of  a  promise  offered  and  a  promise  accepted. 

§34.  Oifer  Must  be  Known  by  Acceptor.-/To  be  ef- 
fectual an  offer  must  be  communicated  to  the  offeree,  or 
the  doer  of  a  service  within  the  offer,  for  without  such  com- 
munication, there  could  be  no  union  of  minds  in  mutuality  of 
assent,  and  therefore  no  contract.  For  this  reason  a  person 
who  performs  a  service  for  which  a  reward  has  been  offered, 
but  who  at  the  time  of  doing  the  service,  does  not  know  of 
the  offer,  cannot  legally  claim  the  reward.^  In  the  case  of 
Fitch  V.  Snedaker,  ^  a  sheriff  offered  a  reWard  for  informa- 
tion leading  to  the  arrest  and  conviction  of  a  murderer. 
The  plaintiff  gave  the  information  which  led  to  the  arrest 
and  conviction  of  the  guilty  party  but  at  the  time  he  did  so, 
he  did  not  know  of  the  offered  reward,  and  the  court  in  a 
suit  brought  to  recover  it  held  that  he  could  never  have  ac- 
cepted it,  not  knowing  it  had  been  made,  and  therefore  was 
not  entitled  to  it. 

\A  frequently  cited  illustration  of  this  principle  is  the 
case  of  a  captain  who  was  engaged  to  command  a  ship.  Be- 
fore the  end  of  the  voyage  for  which  he  had  contracted  he 
gave  up  his  command  but  helped  work  the  vessel  to  her  des- 
tination. It  was  held  that  he  could  not  recover  for  the  ser- 
vices rendered  after  relinquishing  his  command,  inasmuch 
as  his  offer  to  perform  them  had  never  been  communicated 
to  the  owners  of  the  ship  and  they  had  had  no  opportunity 
either  to  refuse  or  to  accept  same.  ^ '  yFor  the  same  reason  it 
has  been  held  that  the  person  who  saves  the  property  of  an- 
other from  destruction  by  fire  without  the  owner's  knowl- 
edge, cannot  recover  for  his  services.  ^^  ;One,  Bartholomew, 
had  a  stack  of  wheat  in  a  field  owned  by  Jackson,  and  which 
he  promised  Jackson  he  would  remove  by  a  certain  time  in 
order  that  the  latter  might  burn  the  stubble.)  (Jackson,  rely- 
ing on  this  promise,  set  fire  to  the  stubble  in  a  distant  part 
of  the  field  and  afterwards  finding  that  the  stack  had  not 
been  taken  away  moved  it  himself  to  save  it  from  the  fire. 
For  this  service  he  brought  suit  against  Bartholomew  for 
pay  for  this  work,  but  the  court  held  that  as  it  was  rendered 
without  the  request  of  Bartholomew,  and  without  his  knowl- 

*38  N,  Y.,  248.  *  Bartholomew  v.  Jackson,    20   Johns 

•Taylor  v.  Laird,  25  L.  J.  Ex.,  329.  (N.  Y.;,  283. 


DEPARTMENT  OF  LAW  55 

edge,  there,  was  no  promise  actual  or  implied  on  his  part  to 
pay  for  it.  / 

§35.  Offers  Partly  Communicated. — In  some  instances 
the  terms  of  an  offer  are  left  partially  uncommunicated.  In 
such  cases  the  liability  of  the  acceptor  depends  upon  his 
knowledge  of  the  existence  of  the  terms  of  the  offer.  In 
an  old  English  case  a  ticket  bore  on  its  face  only  the  words, 
'* Dublin  to  Whitehaven."  The  purchaser  was  held  not  to 
be  bound  by  the  conditions  which  were  printed  on  the  back 
of  the  ticket,  as  on  the  face  thereof  there  was  a  complete 
contract,  and  the  purchaser  had  no  knowledge  of  the  terms 
on  the  other  side.  In  another  instance,  though,  where  the 
face  of  the  ticket  referred  to  "conditions  on  the  back,"  and 
the  purchaser  admitted  knowledge  of  the  existence  of  such 
conditions  but  did  not  read  them  he  was  held  bound  thereby. 
In  all  such  cases,  the  controlling  question  is  whether  the 
terms  of  the  offer  have  been  fully  communicated  to  the 
acceptor  or  his  attention  actually  called  thereto.  ,  The  ten- 
dency is  towards  a  rule  holding  that  if  one  accepts  a  paper 
containing  terms  of  offer,  he  is  bound  by  the  same  although 
he  may  not  choose  to  inform  himself  of  their  nature. )  The 
rule  as  stated  governing  railway  tickets  applies  equally  to 
bills  of  lading,  warehouse  receipts,  telegraph  blanks  and  the 
like. 

§36.  Acceptance  Must  be  Communicated. — ^Accept- 
ance must  be  communicated  to  the  offerer  by  words  or  con- 
duct. A  mere  mental  acceptance  by  one,  of  a  communicat- 
ed offer,  does  not  constitute  a  contract.  A  had  received  from 
B  a  written  agreement  to  pay  him  as  sole  agent,  a  stated 
commission  for  the  sale  of  certain  lands  if  made  within 
three  months.  B  himself  sold  the  land  within  one  month 
and  A  brought  suit  for  breach  of  contract.  It  was  held 
that  inasmuch  as  A  had  failed  to  communicate  to  B  an  ac- 
ceptance of  his  offer,  there  was  no  mutual  obligation,  and 
therefore  that  the  offer  might  be  revoked  by  B,  which  was 
effectually  done  when  he  himself  sold  the  land.  ^^ ) 

A  party  making  an  offer  may  prescribe  a  manner  of  ac- 
ceptance but  he  cannot  by  the  term  of  this  offer  turn  the 
mere  silence  of  the  offeree  into  an  acceptance.    In  other 

*  Stensgaard  v.  Smith,  43  Minn.,  11. 


56         AMERICAN  EXTENSION  UNIVERSITY 

words,  one  cannot  by  his  own  offer  compel  the  offeree  to 
signify  his  refusal  thereof  or  else  be  held  to  have  accept- 
ed it.  A  offered  to  buy  B's  horse,  adding,  "If  I  hear  no 
more  about  it  I  shall  consider  the  horse  mine."  The  evi- 
dence showed  that  B  had  made  up  his  mind  to  accept  the 
offer  but  as  he  had  not  communicated  his  intention  to  A  the 
court  held  that  there  was  no  contract.  ® 

§37.  Acceptance  Must  Coincide  with  Offer. — The  ef- 
fect of  the  due  acceptance  of  an  offer  is  to  form  a  contract. 
It  transforms  the  offer  into  an  obligation  that  binds  the 
parties  thereto.  The  communication  of  an  acceptance  dif- 
fers from  that  of  an  offer  in  that  it  may,  or  may  not,  consum- 
mate a  contract  according  to  the  nature  and  conditions  of 
the  offer.  An  offer  is  not  "communicated"  until  brought 
to  the  actual  knowledge  of  the  offeree,  while  an  acceptance 
may  be  considered  "communicated"  though  it  has  not  actu- 
ally come  to  the  knowledge  of  the  party  making  the  offer. 
If  the  party  making  the  offer  intimates,  either  expressly  -or 
impliedly,  that  a  particular  form  of  acceptance  will  be  suf- 
ficient to  bind  the  bargain,  it  is  only  necessary  for  the  party 
to  whom  the  offer  is  made  to  accept  in  the  manner  indicated. 
Again,  if  the  party  making  the  offer  intimates  that  it  will  be 
sufficient  to  act  on  it  without  communicating  the  acceptance 
of  it  to  him,  the  performance  of  the  consideration  named  in 
the  offer  will  of  itself  constitute  an  acceptance  without  ver- 
bal notice  thereof.  It  may  be  generally  stated  that  if  an  of- 
fer contemplates  the  doing  of  a  certain  act  as  the  consider- 
ation of  the  promise  tendered  by  the  offer,  the  performance 
of  that  act  will  complete  the  contract,  unless  the  offer  di- 
rectly calls  for  the  communication  to  the  offer  or  of  an  ac- 
ceptance. 

§38.  Offer  and  Acceptance  by  Mail. — If  the  offeror  re- 
quires or  suggests  a  particular  means  of  acceptance,  he 
takes  the  risk  of  an  acceptance  so  made  reaching  him.  A 
common  instance  of  this  exists  when  an  offer  is  made  by 
mail,  or  telegram.  In  such  cases  it  is  to  be  assumed  that  the 
acceptance  may  be  made  in  the  same  way  unless  the  offer 
expressly  states  otherwise.  When  acceptance  is  made  in 
the  required  manner,  the  contract  becomes  instantly  bind- 

•  Felthouse  v.  Bindley,  11  C.  B.,  N.  S.,  869. 


DEPARTMENT  OF  LAW  57 

ing,  and  its  consummation  dates  from  the  time  the  accepting 
letter  or  telegram  is  put  in  the  course  of  transmission,  irre- 
spective of  its  actual  receipt  by  the  other.  Where  an  offer 
is  made  by  mail,  the  postoffice  is  regarded  and  is  in  fact  the 
agent  of  the  offeror,  as  was  said  in  one  case.  As  soon  as  the 
letter  of  acceptance  is  delivered  to  the  postof&ce  the  con- 
tract is  as  complete  and  final  and  absolutely  binding,  as  if 
the  acceptor  had  put  his  letter  into  the  hands  of  a  personal 
messenger  sent  by  the  offeror  himself  as  his  agent  to  deliver 
the  offer  and  receive  the  acceptance,  y  The  defense  in  the 
case  cited  was  that  there  was  no  contract  legally  because  the 
plaintiff's  letter  of  acceptance  was  never  received  by  the  de- 
fendant, but  the  court  held  otherwise  on  the  principles  just 
stated.  /In  another  case  the  defendant  offered  by  letter  sent 
through  the  mail  to  insure  the  plaintiff's  house  for  a  stated 
sum,  and  the  plaintiff  accepted  by  mail,  but  before  his  let- 
ter of  acceptance  reached  the  company  his  house  burned. 
The  company  was  held  liable  for  the  agreed  insurance  be- 
cause the  contract  was  completed  when  the  letter  of  the 
plaintiff  was  mailed.  ^  / 

These  decisions  are  based  on  the  theory  that  when  an 
offer  is  made  to  one  who  is  not  in  immediate  communica- 
tion with  the  offeror,  the  offer  remains  open  for  acceptance 
for  such  time  as  is  prescribed  by  the  offeror,  or  as  may  be 
reasonable  under  the  circumstances  for  the  offer  to  be  re- 
ceived and  passed  upon  by  the  offeree.  In  other  words,  that 
an  offer  contained  in  a  letter  remains  open  until  the  letter 
reaches  the  offeree  and  he  has  had  a  reasonable  time  to  con- 
sider same  and  that  a  contract  is  formed  the  moment  he  ac- 
cepts it,  and  in  pursuance  thereof  mails  a  letter  accordingly 
to  the  offeror. 

§39.  When  Acceptance  is  Coniplete.-|-In  case  an  ac- 
ceptance becomes  lost,  or  is  delayed  in  transit,  the  same  rule 
holds  good^though  the  reluctance  of  the  courts  to  apply  it 
makes  it  interesting  to  note  the  steps  by  which  it  has  been 
followed.  /The  principle  was  at  first  laid  down  that  the 
posting  of  a  letter  of  acceptance  completed  the  contract  no 
matter  what  became  of  the  letter.j/ 1  Later  the  English  courts 
tried  to  modify  this  holding  by  saying  that  the  contract  did 

*  Taylor  v.  Merchants  Fire  Ins.  Co.,  9      '  Household  Ins.  Co.  v.  Grant,  4  Ex., 
How.,  390.  108. 


58         AMERICAN  EXTENSION  UNIVERSITY 

not  become  binding  until  the  letter  of  acceptance  was  re- 
ceived, but  that  its  operation  then  dated  back  to  the  date  of 
the  posting  of  the  letter/  'A  later  case  held  that  the  contract 
was  complete  at  the  time  of  posting  the  letter  of  acceptance, 
but  subject  to  the  condition  subsequent  that  if  the  letter  did 
not  arrive  in  due  time,  the  offeror  might  assume  that  the 
offer  had  not  been  accepted./  (llowever,  the  settled  rule  is 
as  has  already  been  made  clear,  that  the  contract  is  conclud- 
ed by  the  posting  of  the  letter  of  acceptance  and  that  it  is  not 
suspended,  or  subject  to  any  condition  occuring  after  the 
letter  is  actually  mailed.  This  rule  holds  good,  also,  and  for 
like  reasons  to  offers  made  by  telegraph,  cable  and  aero- 
graph, and  to  acceptances  thereof  forwarded  by  like  mean^ 

§40.  Acceptance  Must  Not  Modify  Offer. — Tp^form  a 
contract  there  must  be  a  clear  proposition  made  by  one 
party  and  clearly  accepted  by  the  other  without  any  rnoHi- 
fication.  ^^f  the  acceptance  changes  the  offer  in  any  respeci, 
however  small,  it  amounts  simply  to  making  a  counter  offer; 
it  is  not  an  acceptance  which  will  form  a  contract.  ^)  It  has 
well  been  said  that  an  acceptance  to  be  good  must  be  such  as 
to  conclude  an  agreement  or  contract  between  the  parties  on 
the  offer  made,  and  to  do  this,  it  must  in  every  respect  meet 
and  correspond  to  the  offer  neither  falling  short  of  or  going 
beyond  the  terms  proposed,  but  exactly  meeting  them  at  all 
points  and  closing  with  them  just  as  they  stand.  (In  Jen- 
ness  V.  Mount  Hope  Iron  Company,  ^°  the  court  held  that  a 
reply  agreeing  to  take  a  certain  number  of  kegs  of  nails  less 
than  the  quantity  offered  by  the  defendant  at  a  stated  price 
did  not  constitute  an  acceptance  of  the  offer  and  therefore 
entered  a  nonsuit  against  the  plaintiff.)  This  sound  and  es- 
sential doctrine  has,  however,  in  some  instances  been  carried 
to  extremes.  ^^  (iFor  instance,  A  who  lived  in  California  of- 
fered, for  a  price  named,  to  sell  certain  land  to  B  who  lived 
in  Iowa.  B  telegraphed  his  acceptance  adding,  "Money  at 
your  order  at  First  National  Bank  here."  On  suit  brought 
by  A  the  court  held  that  as  the  offer  mentioned  no  place  of 
payment,  B's  telegraph  stating  one  was  a  conditional  ac- 
ceptance and  not  binding  on  either  party  unless  accepted  by 
A.j  (in  another  case  the  plaintiff  offered  the  defendant  $300 

•Potts  V.  Whitehead,  23    N.    J.,   Eq.,      "53  Maine.  20. 

512.  "  Sawyer  v.  Brossart,  67  Iowa,  678. 


DEPARTMENT  OF  LAW  59 

for  two  horses.  Defendant  replied,  **You  may  have  the 
horses  for  $300  if  you  will  come  for  them."  The  court  said 
that  no  contract  was  formed  as  the  acceptance  was  coupled 
witha  new  condition.  ^^ 

^he  principle  that  an  acceptance  must  meet  the  offer 
squarely  and  unconditionallyjis  well  stated  in  Bruner  v. 
Wheaton.  ^^  The  court  therein,  said:  "In  order  that  an 
acceptance  may  be  operative  it  must  be  unequivocal,  uncon- 
ditional, and  without  variance  of  any  sort  between  it  and  the 
proposal,  and  it  must  be  communicated  to  the  other  party 
without  unreasonable  delay.  To  constitute  a  valid  contract 
there  must  be  a  mutual  assenf~of "the  parties  thereto  and 
they" must  assent  to  the  same  thing  in  the  same  sense." 

§41.  Conditional  Acceptance. — A  conditional  accept- 
ance of  an  offer  is  a  rejection  of  the  offer.  Such  an  accept- 
ance is  no  acceptance;  but  merelj^,  as  before  stated,  the  sub- 
stitution of  a  counter  offer.  ^  person  who  thus  conditional- 
ly accepts  an  offer  cannot  thereafter  bind  the  proposer  by 
an  unconditional  acceptance,  even  though  the  offer  has  not 
been  withdrawn.^  In  Cozart  v.  Herndon,  ^^  the  plaintiff,  a 
corporation,  offered  to  purchase  of  the  defendant  certain 
land  for  $15,000  of  its  capital  stock.  The  defendant  re- 
plied that  he  would  accept  the  offer,  but  reserved  in  his  ac- 
ceptance, all  timber  on  the  land  for  his  own  benefit.  The 
court  held  that  such  acceptance  was  conditional  and  that  the 
defendant  was  not  entitled  to  the  stock  offered  as  stated. 

§42.  Ancilliary  Matters  in  Acceptance. — However, 
the  fact  that  an  acceptance  contains  matters  ancilliary  to 
the  transaction  will  not  make  it  conditional.  The  accept- 
ance of  a  load  of  floiu*  offered  for  sale,  is  not  qualified  be- 
cause it  contained  an  inquiry  as  to  the  form  of  remittance.  ^^ 
In  like  manner,  the  acceptance  of  an  offer  to  sell  cotton  has 
been  held  unqualified,  although  it  contained  directions  for 
shipping,  as  the  directions  were  entirely  subordinate  to  the 
contract.  ^® 

§43.  Lapsing  of  Offer. — An  unaccepted  offer  will  lapse 
under  several  conditions  so  that  a  subsequent  acceptance 
will  be  ineffectual.     The  death  or  insanity  of  either  party 

"Fenno  v.  Weston,  31  Vt.,  345.  "Clark  v.  Dales,  20  Barb.,  42. 

"46  Mo.,  363.  "Brisban  v.  Boyd,  4  Paige,  17 

"114  N.  C,  252. 


60         AMERICAN  EXTENSION  UNIVERSITY 

before  an  offer  has  been  accepted  will  cause  it  to  lapse,  for 
the  legal  representatives  of  the  offeror  cannot  be  bound  by 
an  acceptance  and  the  legal  representatives  of  the  offeree 
cannot  accept  an  offer  in  his  behalf./  In  accordance  with  the 
principles  already  stated,  however,  an  acceptance  mailed 
before  the  death  or  insanity  of  the  offeror,  but  not  received 
until  afterwards  makes  a  valid  contract.  ^^  ^^An  offer  may 
also  lapse  because  it  is  not  accepted  in  the  manner  prescrib- 
ed by  the  offer.  /.A  offered  in  writing  to  sell  flour  to  B,  speci- 
fying that  the  answer  be  sent  by  return  of  the  wagon  with 
which  he  the  offer  was  delivered.  B  sent  his  acceptance  by 
mail  thinking  that  it  would  reach  A  sooner  than  by  the 
wagon.  It  was  held  that  A  was  not  bound  by  the  accept- 
ance as  it  was  not  sent  in  the  manner  directed  by  his  offer.  ^^/ 
An  offer  may  also  lapse  by  the  passing  of  the  time  specified 
therein  for  acceptance,  or  if  there  is  no  time  specified,  by 
the  passing  of  such  time  as  is  reasonable  for  acceptance. 
What  amounts  to  a  reasonable  time  is  to  be  determined 
from  all  the  circumstances  of  each  case.  Lastly  an  offer 
mayjapse  by  revocation. 

§44.  When  Offer  is  Revocable. — An  unaccepted  offer 
creates  no  legal  rights  and  may  therefore  be  withdrawn  at 
any  time  before  its  acceptance.  This  is  true  even  though 
there  has  been  a  promise  with  the  offer  to  hold  it  open  for 
a  certain  length  of  time,  unless  the  promise  was  given  for 
a  consideration/  If  there  is  a  consideration  for  the  promise 
to  hold  the  offer  open  for  a  given  time,  this,  of  course,  of  it- 
self constitutes  a  contract,  a  failure  to  comply  with  which 
would  give  the  offeree  the  same  rights  to  specific  perform- 
ance, or  an  action  for  damages,  that  would  arise  under  any 
other  form  of  breach  of  contract/  In  an  old  English  case, 
one,  Oxley,  the  defendant,  offered  Cook,  the  plaintiff,  a 
large  quantity  of  tobacco  at  a  specified  price.  Cook  was 
asked  that  the  offer  be  kept  open  until  four  o'clock  of  a  cer- 
tain day,  to  which  Oxley  agreed,  and  before  that  hour,  Cook 
communicateed  his  acceptance;  but  in  the  meantime,  Oxley 
had  changed  his  mind  and  refused  to  sell.  The  court  held 
that  Oxley 's  promise  to  keep  the  offer  open  was  not  binding 
for  want  of  a  consideration  given  him  by  Cook,  and  that  the 

"Mactler  v.  Frith,  6  Wend.,  103.  "  Eliason  v.  Henshaw,  4  Wheat,  225. 


DEPARTMENT  OF  LAW  61 

offer  could  be  revoked  by  Oxley  at  any  time  before  its  ac- 
ceptance. The  rule  thus  established  continues  in  full  force 
today. 

§45.    Notice  of  Revocation  Must  be  Communicated. — 

Legally  speaking  ''communication"  of  a  revocation  of  an 
offer  differs  from  communication  of  an  acceptance,  in  that 
an  acceptance  is  "communicated"  when  it  is  put  in  the 
course  of  transmission,  while  a  revocation  is  not  communi- 
cated_until  it  is  actually  received.  It  is  possible  therefore 
tEaTa  letter  containing  the  acceptance  of  an  offer  made  to 
its  writer,  and  the  notice  of  the  revocation  of  such  offer  sent 
by  the  offeror,  and  posted  at  the  same  time,  will  result  in 
the  acceptance  being  effectual,  as  it  legally  became  so  on  the 
posting  of  the  letter,  and  the  revocation  being  ineffective, 
because  it  was  not  received  before  the  acceptance  was  mail- 
ed, (tn  case  the  offer  and  withdrawal  are  received  in  sepa- 
rate letters  at  the  same  time,  and  the  acceptance  of  the  offer 
was  put  in  transmission  before  the  letter  containing  the 
withdrawal  was  opened,  the  acceptance  would  form  a  con- 
tract..;' 

The  rule  is  not  so  clear  where  the  party  making  the 
offer  has  done  somd^overt  act  which  puts  it  out  of  his  power 
to  perform  the  contract  upon  acceptance,  but  has  not  com- 
municated his  revocation  to  the  off'eror.  It  is  fairly  certain 
that  an^'^jvert  act  is  a  sufficient  revocation  if  the  person  to 
whom  the  offer  was  made  had  sufficient  notice  of  it ;  but  it  is 
not  very  clearly  settled  what  would  amount  to  sufficient  no- 
tice. It  is  doubtful  if  the  mere  statement  to  the  offeror, 
by  a  stranger  to  the  transaction,  that  the  party  making  the 
offer  had  changed  his  mind,  would  constitute  proper  notice 
to  the  offeree.  If  sufficient  notice  is  lacking,  the  offer  must 
be  held  to  continue  open,  and  will  be  turned  into  a  binding 
contract  by  its  acceptance. 

In  an  old  case,  the  defendant,  in  England,  wrote  to  the 
plaintiff,  in  New  York,  offering  for  sale  a  quantity  of  tin, 
and  asked  for  a  reply  by  cable.  The  plaiiititl:  replied  at 
once  as  requested,  but  the  defendant  in  the  meantime  had 
mailed  a  letter  of  revocation.  The  court  held  that  both 
legal  principle  and  practical  coiTvienience  required  that  a 
person  who  has  accepted  an  offer,  not  known  by  him  to  have 
been  revoked,  shall  be  in  a  position  safely  to  act  upon  the 


62         AMERICAN  EXTENSION  UNIVERSITY 

footing  that  the  offer  and  acceptance  constitutes  a  contract 
binding  upon  both  parties.  ^^  /This  decision  established  the 
]'ule.  that,  until  the  moment  of  acceptance,  an  offer  is  revo- 
coble,  but  that  the  notice  of  revo('<"vti(»Q  must  be  actually 
communicated,  and  the  moment  of  such  communication  is 
the  moment  of  its  actual  receipt  by  the  offeree.  As  we  have 
already  seen,  where  a  party  making  an  offer  uses  the  mail 
as  his  messenger  to  carry  the  offer  and  bring  back  the  ac- 
ceptance, an  acceptance  is  legally  "communicated"  to  him 
when  such  letter  is  mailed  and  thus  put  in  charge  of  his 
chosen  means  of  communication,  but  his  revocation  of  his 
offer  cannot  be  regarded  as  "communicated"  until  it  i^a.ctu  • 
ally  delivered  by  his  messenger  to  the  party  for  whom  it  is 
intended. 

§46.  "Refusals'*  and  Their  Revocation.-/A  "i^gfusar* 
may  be  defined  as  a  promise  to  hold  an  offer  open  for  a  given 
time.  It  frequently  happens  that  persons  give  what  is  call- 
ed a ' '  refusal "  of  an  offer  for  a  certain  length  of  time.  Sucji 
a  promise,  as  we  have  already  found,  is  not  binding  unless 
it  is  supported  by  a  consideration.  In  such  cases,  the  man- 
ner of  retracting  the  refusal  of  an  offer  depends,  to  a  cer- 
tain extent,  upon  whether  the  parties  are  in  immediate  com- 
munication. Where  such  is  the  case  the  offer  may  be  re- 
voked at  once,  any  time  before  acceptance,  and  the  general 
rule  seems  to  be  that  any  gvfiCt  act,  indicating  a  change  of 
intention  by  the  party  making  the  offer,  amounts  to  its  with- 
drawal. Some  courts  hold  this  to  be  true  even  though  the 
withdrawal  is  not  brought  to  the  knowledge  of  the  other 
party./  Where  the  parties  are  at  a  distance,  however,  the 
general  rule,  as  before  stated,  appears  to  be  that  the  party 
to  whom  the  offer  is  made  has  the  right  to  rely  upon  it  and 
to  conclude  the  contract  by  accepting  it  at  any  time  before 
actually  receiving  notice  of  its  revocation. 

§47.  By  Whom  Offer  Must  Be  Accepted. — ^It  is  not  ne- 
cessary that  an  offer  be  niade^jto^  p>articular  ascertained 
person,  but  there  can  be  no  contract  till  it  has  been  ac- 
cepted by  some  ascertained  party.  This  proposition  is  il- 
lustrated by  tlie  general  offer  of  a  reward  to  the  public  for 
certain  information,  or  for  any  other  named  service.)    Such 

"  Bryne  v.  Van  Tienboren,  5  Common     Pleas    Div.,  344. 


DEPARTMENT  OF  LAW  63 

an  offer  becomes  a  contract  to  pay  the  reward  whenever  any 
individual  renders  the  service.  The  troublesome  questions 
which  arise  in  connection  with  this  class  of  contracts  come 
mainly  from  two  causes,  first,  where  the  party  performing 
the  service  maynof,  at  the  time  of  performance,  know  of 
the  offer  of  the  reward.  Upon  the  question  of  the  right  to 
the  reward  under  such  circumstances,  the  courts  disagree, 
some  holding  that  it  is  not  necessary  that  the  reward  should 
be  the  motive  for  the  service  rendered,  but  that  the  contract 
is  with  any  person  who  performs  the  service  requested. 
Others  hold  that  the  reward  can  not  be  recovered  by  a  per- 
son performing  the  service,  in  ignorance  of  the  offer,  be- 
cause there  is  Jacking  t[u)  mutual  coiisent  fissential  to  the 
formation  of  a  contract. 

cAs  illustrative  of  the  former  rule,  we  mnj  s:iy  that  the 
English  courts  allowed  a  plaintiff  to  recover  the  offered  re- 
wamon  the  ground  that  there  was  a  valid  contract  consum- 
mated with  the  person  who  performed  the  condition  men- 
tioned in  the  advertisement.  The  chief  contention  of  the 
defendant  in  that  case  referred  to  was  that  the  reward  was 
not  the  motive  of  the  plaintiff  in  giving  the  information,  but 
the  court  held  the  motive  was  immaterial.  ^^  On  the  other 
hand^  the  basis  of  the  ruling  that  one  is  not  entitled  to  a  re- 
ward, as  a  matter  of  contract, — where  he  performed  the  ser- 
vice in  ignorance  at  the  time,  of  the  reward  offered,  we  may 
set  the  case  of  Fitch  v.  Snedaker,  wherein  the  court  said: 
•'To  the  existence  of  a  contract  there  must  be  mutual  assent, 
or  in  another  form,  offer  and  consent  to  the  offer  J'  The  mo- 
tive  inducing  consent  may  be  immaterial,  but  the  consent  is 
^aTTvf  ithout  that  there  is  no  contract.  How  then  can 
ffiere  be  consent  or  assent  to  that  of  which  the  party  has 
never  heard?"  ^^ 

fThe  second  source  of  difficulty  is  presented  by  declar- 
ation qf^aii  intention,  or  statements  of  probable  action,  sent 
out  generally  by  circular  letter,  advertisements,  or  other 
method  of  miscellaneous  offerings./  vThe  acceptance  of  any 
such  statements,  not  definitely  made  as  clear  propositions, 
can  not  result  in  any  contractual  liability^  (They  must  be 
distinguished  from  general,  actual,  definite,  offers  whose  ac- 

»  Williams  v.  Carwadine,  4  B.  &  A.,  "38  N.  Y.,  250. 
621. 


64         AMERICAN  EXTENSION  UNIVERSITY 

ceptance  by  an  individual  forms  a  contract.  In  the  cases 
under  consideration  terms  must  be  carefully  distinguished 
from  mere  matters  of  inducement,  for  every  term  of  an  offer 
becomes  a  promise  when  the  offer  is  accepted,  while  mat- 
ters of  inducement  impose  no  liability  on  any  one.  As  illus- 
trating this  distinction  is  the  case  of  Moulton  v.  Kershaw,  ^^ 
wherein  the  defendants  sent  a  communication  to  the  plain- 
tiffs, saying,  "We  are  authorized  to  offer  Michigan  salt  at 
eighty-five  cents  per  barrel.  Shall  be  pleased  to  receive 
your  order."  The  plaintiffs  ordered  two  thousand  barrels 
but  the  defendants  refused  to  fill  the  order.  The  court  held 
that  the  defendants'  letter  was  simply  an  invitation  to  deal, 
and  not  an  actual  offer  that  could  be  turned  into  a  binding 
contract  by  acceptance. 

§48.  Same — Auctions. — Some  of  the  above  distinc- 
tions arise  in  connection  with  sales  by  auction.  An  auc- 
tioneer's advertisement  of  a  sale  of  goods  is  held  not  to  bind 
him  to  conduct  the  sale  at  the  time  announced,  and  so,  fail- 
ure to  do  so  does  not  make  him  legally  liable  to  reimburse 
parties  who  expend  money  to  attend  the  advertised  sale.  ^^ 
The  court  said:  "Unless  every  declaration  of  intention  to  do 
a  thing  creates  a  binding  contract  with  those  who  act  upon 
it,  and  in  all  cases  after  advertising  a  sale  the  auctioneer 
must  give  notice  of  any  articles  that  are  to  be  withdrawn,  we 
can  not  hold  the  defendant  liable."  However,  an  advertise- 
ment of  an  auction  "without  reserve"  creates  a  binding 
promise  on  the  part  of  the  auctioneer  to  deliver  the  goods  to 
the  highest  bidder  at  the  sale.  -^  This  case  differs  from  the 
preceeding  one  in  that  the  highest  bidder  is  a  definite  person 
who  has  fulfilled  the  terms  of  a  definite  offer,  while,  the  at- 
tendant of  an  advertised  sale  is  merely  one  of  an  indefinite 
number  of  persons  who  at  the  sale  might  not  actually  bid, 
and  whose  losses  therefore  cannot  be  definitely  ascertained. 
When  an  auctioneer  actually  puts  up  property  for  sale  and 
receives  bids  therefor,  the  putting  up  of  the  property  is  an 
offer,  and  a  bid  therefor  is  an  acceptance  of  the  offer  at  the 
price  bid.  Each  subsequent  larger  bid  is  an  acceptance  by 
the  auctioneer  of  the  last  preceeding  bid,  to  the  extent  that 

="59  Wis.,  316.  Bench,  286. 

"Harris     v.     Nickerson,     8     Queen's      "  Warlow  v.  Harrison,  1  E.  &  E.,  295. 


DEPARTMENT  OF  LAW  65 

he  can  be  legally  held  thereto  by  the  highest  responsible  bid- 
der. 

§49.  Public  Offers  and  Bids  for  Contracts.— To  the 
same  general  effect  as  offers  and  bids  at  public  auctions,  so 
far  as  the  liabilities  of  the  offeror  and  the  rights  of  the  of- 
feree— or  bidder — are  concerned,  are  the  legal  rules  govern- 
ing public  offers  for  supplies,  contracts,  and  the  like. 

Where  one,  by  public  print,  or  other  form  of  promis- 
cous  and  general  publicity,  seeks  offers  for  certain  specified 
materials,  or  for  stated  work  or  services,  requesting  bids 
therefor,  he  impliedly,  if  not  actually  tenders  the  order  or 
contract  therefor  to  the  one  making  the  highest  bid.  Ac- 
cordingly, unless  the  public  announcement  specifically  re- 
serves the  right  to  reject  bids,  the  highest  responsible  bid- 
der can  legally  compel  the  other  party  to  give  him  the  order 
advertised.  The  reason  for  this  is  that  such  bid  is  an  ac- 
ceptance of  the  offer,  and  itself  constitutes,  and  consum- 
mates a  contract.  The  offer  of  the  order,  though  made  to 
the  world  at  large,  is  made  to  an  '* ascertained"  person  the 
moment  a  responsible  party  puts  in  lEe  best  bid.  Of  course, 
where  such  public  offer  for  bids  is  coupled  with  certain  stat- 
ed conditions,  all  bids  thereimder  are  held  subject  to  such 
conditions.  An  offer  must  be  sufficiently  definite  in  terms, 
to  be  capable  of  creating  legal  relations,  in  order  for  its  ac- 
ceptance to  constitute  a  binding  obligation.  AVhere  one 
agrees  to  do  certain  work  for  another,  for  "whatever  is 
right,"  there  is  no  contractual  relation  thus  created  suffi- 
ciently definite  to  be  enforced  by  law.  -^  J 

§50.  Offer  Must  Concern  Contractual  Relations. — An 
offer  to  be  entitled  upon  its  acceptance  to  be  made  the  basis 
of  legal  rights  and  action  if  not  then  fulfilled,  must  be  in 
relation  to  such  matters  as  are  subject  to  contractual  liabil- 
ity. For  instance,  the  offer  of  hospitality  embodied  in  an 
invitation  to  a  social  function,  and  its  acceptance  by  one  in- 
vited, although  thereby  the  latter  may  incur  expense  and  if 
the  function  is  not  held  he  may  be  said  to  have  suffered  some 
loss  or  damage,  cannot  be  made  the  subject  of  legal  redress, 
where  the  invitation  is  withdrawn,  or  the  function  is  aban- 
doned.    In  other  words  such  matters   are   not,   generally 

"Taylor  v.  Brewer,  1  M.  &  S.,  290. 


66         AMERICAN  EXTENSION  UNIVERSITY 

speaking,  capable  of  legal  recognition,  for  they  do  not  con- 
stitute legal  contractual  relations. 

§51.  Conflict  of  Laws. — Where  the  locality  of  the  for- 
mation of  a  contract  is  material,  as  very  frequently  is  the 
case,  it  is  determined  by  the  place  of  the  acceptance.  Thus, 
where  an  offer  was  made  in  Massachusetts  and  accepted  in 
Rhode  Island,  it  was  held  that  the  contract  was  made  in  the 
latter  state  and  must  be  determined  by  Rhode  Island  law.  ^° 
This  matter  becomes  material  in  determining  the  law  by 
which  a  contract  is  to  be  interpreted  and  enforced,  and  also 
often  in  deciding  upon  the  capacity  of  the  parties  to  the  con- 
tract, since  the  laws  of  different  states  vary  on  these  points. 
The  consideration  of  these  questions  will  be  taken  up  later 
and  dealt  with  fully  when  we  come  to  the  subject  of  Conflict 
of  Laws. 

*•  Perry  v.    Iron   Company,    15    R.   I. ,380. 


QUIZZEE. 


^  d^^ 


OFFER  AND  ACCEPTANCE.  ,    /  >j^ 

1-§31.    What  is  the  basis  of  every  contract?  s^df^'^  ' 

2-  How  is  the  expression  of  mutual  intention  usually 

given? 

3-  Illustrate  common  forms  of  offers  and  acceptances. 
4-§32.    How,  other  than  by  words,  can  offer  and  accept- 
ance be  made?    Illustrate.  'T[i  -■'  »-  cxr^J--c <^  «A^ 

5-  State  the  rule  governing  contracts  by  conduct. 

6-  When  must  a  definite  request  covering  contract  be 

made? 

7-  When  will  silence  suffice  to  bind  one  ? 

8-  State  the  distinction  between  implied  and  ex- 

pressed acceptances. 
9-§33.     Give  illustrations  of  various  forms  of  offers  and  ac- 
ceptances. 
10-§34.    What  is  necessary  on  the  part  of  the  acceptor  to 
obligate  the  offeror?     .v^aaV  «.ci<t<-vA- 

11-  Is  one  who  performs  service  in  ignorance  of  offered 

reward,  entitled  thereto  ? 

12-  Is  the  rule  on  this  point  uniform?    If  not  state  dif- 

ferent views,  and  basis  of  each.      0 


DEPARTMENT  OF  LAW  67 

13-  Give  at  least  two  illustrations  on  this  point. 

14-§35.    Where  the  terms  of  an  offer  are  only  partially 

known  to  an  acceptor,  what  is  the  governing 

rule? 
15-  What  is  essential  on  the  part  of  an  acceptor  to  bind 

the  offeror  to  his  offer? 
16-§36.    What  do  you  know  about  conditions  printed  on 

railway  tickets,  bills  of  lading,  telegraph  blanks, 

and  the  like? 

17-  Can  one  bind  an  offeror  by  simply,  in  his  own  mind, 

accepting  the  offer? 

18-  What  is  mutually  necessary  between  offeror  and 

acceptor  to  bind  both? 

19-  Cannot  an  offeror  prescribe  the  manner  of  the  ac- 

ceptance of  the  offer? 

20-  What  limit,  if  any,  is  there  to  such  right  ? 

21-  Give  an  illustration  of  attempted  limitations  on 

the  right  of  an  offeree  to  refuse  an  offer. 

22-  What  is  the  effect  of  due  acceptance? 

23- §37.     How  does  a  communication  of  an  acceptance  differ 
from  that  of  an  offer? 

24-  When  is  an  offer  not  '* communicated?" 

25-  When  is  an  acceptance  "communicated?" 

26-  How  must  an  acceptance  be  made  where  the  offer 

names  a  method  for  same  ? 

27-  If  an  offer  indicates  that  doing  a  stated  thing  will 

be  an  acceptance,  what  is  the  legal  result  of  so 
doing? 
28-§38.     State  the  rules  governing  acceptance  of  offers 
made  by  mail  or  telegraph? 

29-  In  offers  by  mail  what  is  the  legal  relation  to  of- 

feror of  the  postoffice  service?    Same  as  to  one 
by  telegraph. 

30-  When  does  an  acceptance,  duly  made  by  mail  or 

telegraph,  operate  to  consummate  a  contract? 

31-  Give  illustrations  of  binding  acceptances  by  mail 

where  letter  of  acceptance  never  reached  offeror. 

32-  What  is  the  legal  theory  underlying  the  governing 

rule  in  such  cases  ? 
33-§39.     State  the  progressive  steps  whereby  existing  rule 
in  such  cases  became  legally  established. 


68         AMERICAN  EXTENSION  UNIVERSITY 

34-  Restate  the  now  settled  rule  for  acceptance   by 

mail  or  telegraph. 

35-  What  is  essential  to  constitute  a  valid  contract? 
36-§40.    If  an  acceptance  modifies,  or  changes  the  terms 

of  the  offer,  what  results  ? 

37-  Give  illustrations  of  modifying  acceptances,  and 

tell  the  result  in  each  case. 

38-  State  some  extreme  cases  of  the  application  of  the 

rule  of  modified  acceptances. 

39-  What  is  necessary  to  make  an  acceptance  fully  and 

clearly  operative  ? 

40- §41.    What  is  the  legal  effect  of  conditional  acceptances  ? 

41-  Give  an  illustration  of  a  conditional  acceptance. 

42- §42.  How  does  ancilliary  matter  in  an  acceptance  af- 
fect its  legal  operation? 

43-  State  some  illustrative  cases  of  acceptances  with 

ancilliary  matters  therein. 

44§43.    Wlien  will  an  offer  lapse  ? 

45-  Can  an  offer  made  by  one  who  subsequently  dies  be 

accepted  thereafter  by  offeree  ? 

46-  Can  one 's  legal  representatives,  after  his  death,  ac- 

cept an  offer  made  him? 

47-  What  is  the  rule  where   an  acceptance  is  duly 

mailed  by  offeree  before  offeror's  death  but  not 
received  until  afterwards? 

48-  State  what  you  know  about  an  offer  lapsing  be- 

cause not  accepted  in  the  manner  the  offer  pre- 
scribed. 

49-  Same,  as  to  lapse  of  offer  by  the  passing  of  time. 

50-  How  is  ''reasonable  time,"  for  the  acceptance  of 

an  offer,  to  be  determined? 

51-  How,  otherwise  than  by  ways  covered  by  questions 

already  asked,  can  offers  lapse? 

52-  When  can  an  offer  be  revoked  or  withdrawn  ? 
53-§44.    What  rights  are  created  by  an  unaccepted  offer? 

54-  Suppose  offer  is  coupled  with  a  promise  to  hold  it 

open  for  a  stated  time,  what  effect  has  such 
promise  ? 

55-  When  will  a  promise  to  hold  an  offer  open  be  bind- 

ing on  offeror? 


DEPARTMENT  OF  LAW  69 

56-§45.     State  the  legal  difference  between  "communica- 
tion'* of  the  revocation,  and  one  of  the  accept,- 
ance,  of  an  offer — be  explicit. 

57-  What  difference,  if  any,  is  there  in  the  rule  as  to 

such  "communication"  where  the  parties  are 
together,  and  where  they  are  distantly  apart  ? 

58-  Suppose  an  offeror  has  done  some  act  rendering  it 

impossible  to  fulfill  his  offer,  what  follows? 

59-  What  would,  and  what  would  not,  constitute  no- 

tice to  offeree  of  offeror's  change  of  intention? 

60-  What  are  the  legal  rights  of  an  offeree  who  has 

accepted  an  offer,  not  knowing  of  its  revocation 
by  offeror? 

61-  State  concisely,  the  rule  as  to  up  to  what  moment 

an  offer  is  revocable;  and  likewise   as   to   the 
"communication"  of  revocation. 
62-§4:6.    Define  '  *  refusals ' '  of  offers. 

63-  When  are  "refusals"  legally  obligatory? 

64-  When  can  they  be  revoked  and  how? 

65-§47.     By  whom  can,  or  must,  an  offer  be  accepted  to 
bind  the  offeror? 

66-  Must  offers  be  made  to  definite  individuals  to  hold 

the  offeror? 

67-  What  about  offers  of  reward,  as  constituting  legal 

obligations? 

68-  When  do  such  offers  become  binding  contracts  ? 

69-  What  troublesome  questions  arise  in  such  matters  ? 

70-  State,  and  illustrate,  the   rule   governing   cases 

where  a  party  does  a  service  ignorant  of  a  re- 
ward offered  therefor. 

71-  What  differing  rules  prevail  on  this  point,  and 

state  the  basis  of  each. 

72-  How  do  statements   indicating   offers,   differ  in 

legal  obligation,  from  actual  offers? 

73-  Are  matters  of  inducement  to  trade,  legally  offers? 

74-  State  distinguishing  characteristics  of  such  forms 

of  communication. 
75-§48.    What  distinctions  arise  in  cases  of  auction  sales  ? 
76-  Does  the  failure  to  hold  an  auction  at  the  time 

named  in  an  advertisement  render  the  advertiser 

liable  to  one  who  attends   at  time   and  place 

stated — and  why? 


70         AMERICAN  EXTENSION  UNIVERSITY 

77-  What  is  legal  effect  of  an  advertisement  of  an  auc- 

tion '  *  without  reserve  ?  " 

78-  When  is  an  auctioneer  bound  by  bids  received  upon 

his  offers? 

79-  What  is  the  legal  nature  and  effect  of  increasing 

bids? 
80- §49.    What  rules  govern  public  offers  for  contracts? 

81-  What  legal  rights  does  one  acquire  by  answering 

advertisements  for  supplies,  etc.,  and  making 
bids? 

82-  How,  if  at  all,  can  the  general  legal  rights  of  a  bid- 

der under  such  circumstances,  be  curtailed? 
83-§50.     To  what  must  offers  relate  to  make  them  obliga- 
tory upon  acceptance  ? 

84-  Can  offers  included  in  social  invitations  be  made 

the  basis  of  legal  redress  if  withdrawn? 

85-  What  is  the  rule  as  to  definiteness  of  terms  of  an 

offer,  to  bind  one  thereto  legally? 
86-§51.    How  are  contracts  based  upon  an  offer  made  in 
one  state,  and  received  and  accepted  by  a  party 
in  another  state,  to  be  construed? 
88-  Where    are    contracts    so    entered    into    legally 

"made,"  or  executed? 


DEPAETMENT  OF  LAW  71 

LESSON  6.— 

CHAPTER  VL 

STATUTE   OF  FRAUDS. 

§52.  Definition  and  Origin. 

53.  English    Statute — American    Counterparts. 

54.  As  Affecting   Realty  Transactions. 

55.  Fourth  Section. 

(a)  Promise  by  Executor  and  Administrator. 

(b)  Promise  to  Answer  for  Another's  Obligation. 

(c)  Marriage  Agreements. 

(d)  Contracts  for  Interest  in  Lands. 

(e)  Contracts  Not  Performed  Within  a  Year. 

56.  Seventeenth  Section.     Contracts  for  Sale  of  Goods,  Wares  and  Mer- 

chandise. 

(a)  In  General. 

(b)  What  this  Section  Includes. 

(c)  Value  of  Goods. 

(d)  Partial  Acceptance  and  Receipt. 

(e)  Payments    of    Earnest    Money. 

57.  Memorandum  Required  by  Statute, 

(a)  Form. 

(b)  Parties. 

(c)  Substance. 

(d)  Varying  Written  Terms  by  Parol  Evidence. 

(e)  Must  State  Consideration. 

(f)  Who  Must  Sign  Memorandum. 

58.  Operation  and  Effect  of  Statute. 

59.  Summary. 

52.  Definition  and  Origin. — What  is  known  as  the 
"Statute  of  Frauds,"  is.that  act  of  the  legislature  passed  to 
prevent  fraud,  and  to  that  end  requiring  contracts  concern- 
in^  certain'mat^ers  to  be  in  writing — or  at  least'  that  some 
writfen,"de finite  memoranda  thereof  be  made, — or  that,  in 
personal  property  transactions,  in  lieu  of  the  writing,  a  full 
or  partial  delivery  and  acceptance  be  made,  or  a  full  or  par- 
tial payment  therefor  be  given.  Each  state  has  a  statute 
of  this  kind,  and  known  by  this  name;  and  while,  in  some 
respects  the  statutes  of  the  respective  states  vary,  they 
are  all  based  upon,  and  closely  follow  the  original  statute  of 
frauds,  enacted  in  England,  in  1676. 

§53.    English  Statute,  and  American  Counterparts. — 

The  object  of  the  English  statute,  like  that  of  13  Elizabeth, 
was  to  prevent  the  facility  with  which  frauds  were  com- 
mitted, and  to  remove  the  temptation  to  perjury  offered  by 
dependance  upon  parol  or  oral  evidence  alone.  The  Act  was 
entitled,  ''An  Act  for  Prevention  of  Frauds,  and  Perjuries," 
and  its  purpose  was  declared  in  its  opening  paragraph, 
thus:  *'For  prevention  of  many  fraudulent  practices,  which 


72         AMERICAN  EXTENSION  UNIVERSITY 

are  commonly  endeavored  to  be  upheld  by  perjury  and  sub- 
ornation of  perjury." 

The  statute  was  very  sweeping  in  its  provisions,  cover- 
ing numerous  stated  cases,  and  conditions.    Only  two  sec- 
tions of  the  original  statute,  however,  have  been  generally 
adopted  in  the  United  States,  viz.,  the  fourth  and  the  sev- 
enteenth.    Some  states  have  accepted  both  of  these  sec- 
tions, in  substantially  their  entirety,   while  others   have 
taken  only  the  fourth.    The  careful  student  will,  of  course, 
refer  to  the  statute  of  his  own  state  for  specific  information 
as  to  its  special  provisions,  as  in  all  like  instances;  but  the 
following  review  of  the  statute  will  be  found  to  accurately 
cover  all  of  its  general  features.    The  original  statute  did 
not  make  a  contract  entered  into   against   its   provisions, 
null  and  void, — it  still  r  'cognized  such  contracts  as  being 
vaUd  so  far  as  their  bona-lides  were  concerned — -but  it  sim- 
ply forbade  their  enforcement  by  the  courts.     That  is  to 
say,  the  act  related  to  the  remedy,  not  to  the  right,  of  such 
contracts,  and  applied  its  restraint  by  providing  that,  "no 
action  shall  be  brought"  on  contracts  made  in  violation  of 
its  requirements.    This  characteristic  has  been  followed  by 
most  of  the  states,  but  a  very  few,  Missouri  and  Wisconsin, 
only,  at  the  present  time,  make  the  specified  contracts  ab- 
solutely void, — that  is,  absolutely  without  legal  effect. 

The  chief  practical  distinction  between  these  two 
classes  of  provisions  is  that  under  the  former,  and  the  gen- 
eral rules,  contracts  made  in  violation  of  the  statute,  while 
unenforceable  in  themselves,  may  nevertheless  be  relied 
upon  and  proven  when  they  are  only  collaterally,  i.  e.  indi- 
rectly at  issue,  while  in  the  latter  instance  they  are,  legally, 
wholly  unrecognized. 

§54.  As  Affecting  Realty  Transactions. — By  far  the 
most  important  contracts  coming  within  the  statute  of 
frauds,  and  therefore,  required  to  be  in  writing,  are  those  af- 
fecting the  transfer  of  the  title  to,  or  of  some  interest  in, 
land.  While  our  present  study  is  upon  the  general  subject 
of  contracts  and  all  the  elements  thereof  already  covered, 
and  those  which  will  later  be  considered,  are  fully  appli- 
cable to  agreements  concerning  real  estate,  still,  because  of 

•  MIchelB  V.  West,  109  111.,  App.,  418. 


DEPARTMENT  OF  LAW  73 

the  general,  specific,  clear-cut  distinction  between  contracts 
affecting  personalty,  and  those  relating  to  realty,  the  provi- 
sions of  the  statute  of  frauds  referring  to  the  latter  class  of 
engagements,  will  be  presented  and  discussed  under  the 
subject  of  Real  Property.  Accordingly  we  now  turn  to  a 
consideration  of  those  other  sections  of  the  statute  in  gen- 
eral use  in  this  country. 

§55.  The  Fourth  Section — (a)  Promise  by  Execu- 
tor or  Administrator. — Subdivision  (1)  of  section  4  of  the 
statute  provides  that  no  action  shall  be  brought  to  charge 
an  executor  or  administrator  upon  any  special  promise  to, 
answer  damages  out  of  his  own  estate  unless  the  agreement, 
or  some  memorandum  or  note  thereof,  shall  be  in  writing 
and  signed  by  the  party  to  be  charged  therewith,  or  some 
other  person  by  him  lawfully  authorized^ 

,  If  an  executor  or  administrator  has  no  assets  of  the  es- 
tate in  his  possession  at  the  time  of  making  the  promise, 
then  the  statute  applies, ^otherwise,  he  is  presumed  to  have 
promised  in  behalf  of  the  estate.  ^  /^he  promise  must  be  to 
pay  the  debt  of  the  decedentj^nd  not  one  contracted  by  its 
executor  or  administrator  in  the  course  of  the  administra- 
tion of  the  estate.  Such  debts  are  the  personal  obligations 
of  the  executor  or  administrator  for  which  he  will  be  given 
credit  on  his  final  settlement. "  In  Meade  v.  Bowles,  '^  the 
defendant  was  an  administrator  who  had  promised  orally 
to  pay  the  plaintiffs  their  attornej'^  fees  for  services  in  con- 
nection with  the  estate.  The  defense  was  that  the  contract 
not  being  in  writing  was  void  under  the  Statute  of  Frauds. 
The  court  held  that  inasmuch  as  the  defendant  had  agreed 
to  pay  the  plaintiffs,  the  fact  that  the  services  were  for  the 
estate  made  the  debt  none  the  less  the  debt  of  the  defendant 
and  not  the  debt  of  the  estate,  and,  therefore,  not  a  promise 
to  ** answer  for  a  debt  of  the  estate." 

(b)  Promise  to  Answer  for  Another's  Obligations. — 
Subdivision  (2)  of  the  same  section  provides  that  no  action 
shall  be  brought  whereby  to  charge  a  defendant  upon  any 
special  promise  to  answer  for  the  debt,  default  or  miscar- 
riage or  another,  unless  the  agreement  upon  which  the  ac- 
tion is  brought,  or  some  memorandum  or  note  thereof,  is  in 

=  Pratt  V.  Humphery,  22   Conn.,   317.  v  Stuart,  115  N.  Y.,  638. 

=■  Baker  v.  Fuller,  61  Me.,  152;  Wales      *  123  Mich.,   696. 


74         AMERICAN  EXTENSION  UNIVERSITY 

writing  signed  by  the  party  to  be  charged  therewith  or  by 
some  person  by  him  duly  authorized. 

/The  essentials  to  bring  a  case  within  this  section  of  the 
statute  are  that  there  be  a  binding  and  subsisting  liability 
or  obligation  on  the  part  of  a  third  person  to  the  promisg^ 
That  is  to  say, — To  bind  the  promisor,  the  party  for  whom 
the  promise  is  made  must  be  legally  liable  to  the  promisee — 
the  person  to  whom  the  promise  is  made, — and  such  promise 
must  be  in  writing.  °  For  instance :  A  owes  a  debt,  or  is  oth- 
erwise obligated,  legally,  to  B;  in  order  to  bind  C  to  pay  such 
debt,  or  answer  for  the  failure  of  A  to  fulfill  his  obligation, 
C's  promise  to  B  to  answer  for  A's  default  must  be  in  writ- 
ing. ^  If,  however,  the  promise  is  original  and  apart  from 
any  other  obligation,  even  though  it  be  for  the  benefit  of  a 
third  person,  the  agreement  is  binding  although  not  in  writ- 
ing. However,  it  is  generally  held  that  recognizances,  or 
oral  agreements  to  stand  sponsor  for  the  appearance  of  an 
accused,  are  original  promises  to  the  state.  This  rule  seems 
to  be  based  upon  public  policy  rather  than  upon  the  fact 
that  it  is  not  within  the  statute. 

The  test,  in  these  cases,  is:  Is  the  promise  original  or 
collateral?  '^  If  collateral,  it  is  within  the  application  of  the 
statute.  The  facts  of  each  case  must  determine  this  ques- 
tion for  itself.  (If  the  promise  is  supported  by  a  considera- 
tion beneficial  to  the  promisor,  it  is  original.  ^^ 

(The  fact  of  domestic,  social  or  business  relationship  de- 
termines the  question  only  when  the  promisor  is  bound  for 
the  liabilities  of  the  person  for  whose  primary  benefit  the 
promise  is  made)  Such  is  the  case  in  promises  by  the  hus- 
band for  the  payment  of  obligations  of  the  wife,  the  promise 
of  one  partner  for  a  consideration  to  another,  and  the  like. 

f  An  oral  promise  to  discharge  the  debt  of  anothei*,  if 
made  to  the  debtor  himself,  is  not  within  the  statute ;  but  if 
the  promise  is  made  to  one  to  whom  the  debtor  is  liable,  it  is 
within  the  statute^  In  Vogel  v.  Melms,  ^  the  defendant 
agreed  to  indemnify  the  plaintiff  if  the  latter  would  endorse 
the  note  of  a  third  person.  The  plaintiff  relied  solely  upon 
the  defendant's  oral  promise  and  did  not  look  to  the  person 

•  20  Cyc.  162,  Sec.  4.  Resseter  v.  Waterman,  15  111.,  169. 

•Burt  V.  Hickle,  18  Ind.,  App.,  509;  » Harding  v.  Joseph,  14  Cal.,  642. 

Martin  v.  Jackson,  106  HI.,  433.  »31  Wis.,  306. 
'Meade  v.  Bowles,    123    Mich.,    696 


DEPARTMENT  OP  LAW  75 

directly  benefited  for  indenmity  in  case  he  should  be  com- 
pelled to  pay  the  note.  The  jury  so  found  and  the  court  af- 
firmed judgment  for  the  plaintiff.  ^^ 

(c)  Marriage  Agreements. — Subdivision  (3)  provides 
that  no  action  shall  be  brought  to  charge  any  person  upon 
any  agreement  made  in  consideration  of  marriage,  unless 
the  agreement,  or  some  memorandum  or  notes  thereof, 
shall  be  in  writing  and  signed  b}^  the  party  to  be  charged 
therewith  or  by  some  person  thereunto  by  him  duly  au- 
thorized. 

Similar  provisions  are  in  force  in  nearly  all  of  the 
United  States.  The  statute,  as  later  interpreted  in  Eng- 
land, does  not  apply  to  mutual  promises  to  marry,  and  never 
did  in  this  country,  as  they  are  founded  upon  a  material 
consideration  of  marriage.  It  is  necessary  to  distinguish 
between  verbal  promises  made  in  consideration  of  marriage, 
and  those  which  are  made  merely  in  contemplation  of  mar- 
riage. In  Larsen  et  al.,  v.  Johnson,  ^^  the  heirs  of  the  de- 
ceased wife  contended  that  the  statute  of  frauds  invalidated 
— rendered  void — under  the  Wisconsin  statutes,  a  convey- 
ance to  the  second  husband  who  had  married  deceased  under 
an  oral  agreement  to  marry  her  and  support  her  during  life 
in  return  for  said  conveyance  to  him.  The  court  held  that 
''there  was  sufficient  lawful  and  valuable  consideration  of 
marriage, ' '  and,  although  the  agreement  was  not  in  writing, 
it  was  fully  executed  and  performed  by  both  parties  to  the 
agreement,  thus  making  the  case  out  of  the  statute.  But  a 
promise  to  give  a  stated  sum  of  money  to  one  for  a  certain 
person  and  not  marrying  another,  must  be  in  writing  to  be 
legally  enforceable.  ^'"^ 

(d)  Contracts  for  Interest  in  Lands. — Subdivision  (4) 
provides  that  no  action  shall  be  brought  to  charge  any  per- 
son upon  any  contract  or  sale  of  lands,  tenements  or  heredi- 
taments, or  any  interest  in  or  concerning  them,  unless  the 
agreement,  or  some  memorandum  or  note  thereof,  shall  be 
in  writing  and  signed  by  the  party  to  be  charged  therewith 

"  In   the   case   of   Voris   v.   Star   City  read  this  case,  carefully. 

Bldg.  and    Loan    Assn.,    120    Ind.  "Short  v.  Statts,  58  Ind.,  29;   Clark 

App.,  630;   the  court    in    its    deci-  v.   Pendleton,   2   Conn.,   495. 

sion   cites    many    contracts,   which  "^^  78  Wis.,  300. 

are  and  which  are  not,  within  the  "Austin  v.  Kuehn,  111  111.  App.,  506; 

statute.       students    are    urged    to  Affirmed,  211  111.,  113. 


76         AMERICAN  EXTENSION  UNIVERSITY 

or  by  some  person  thereunto  by  him  duly  authorized. 

It  is  not  always  easy  to  say  what  is  an  ''interest"  in 
land  within  the  meaning  of  this  division  of  this  section  of 
the  statute  but  it  is  safe  to  say  that  the  interest  must  not  be 
inappreciable  and  remote.  /An  agreement  to  pay  costs  of  ah 
investigation  of  title  for  instance,  is  not  within  the  opera- 
tion of  the  section,  nor  would  an  agreement  to  transfer 
shares  in  a  railway  company  which,  though  it  possessed 
land,  does  not  give  any  appreciable  interest  in  that  land  to 
its  individual  stockholders.  The  principal  question  of  in- 
terest under  this  subject  relates  to  the  sale  of  crops.""'  A  dis- 
tinction exists  as  to  these,  between  what  are  called  enable- 
ments, or  i^ructus  industriales;  and  growing  grass,  timber, 
or  fruit  upon  the  trees,  which  are  called  fructus  naturales. 
Fructus  industriales  do  not  in  any  sense  constitute  an  in- 
terest in  land.J  Fructus  naturales  are  considered  to  do  so  if 
the  sale  contemplates  the  passing  of  the  property  in  them 
before  they  are  severed  from  the  soil.  If  the  property  is  to 
pass  after  severance,  both  classes  of  crops  are  goods,  wares 
and  merchandise  within  the  meaning  of  the  17th  section  of 
the  statute,  to  be  considered  later.  But  where  fructus  in- 
dustriales is  intended  to  pass  before  severance,  there  is  a 
general  uncertainty  whether  they  fall  within  the  scope  of 
section  17,  though  it  is  certain  that  the  sale  is  not  gov- 
erned by  section  4.  ^* 

(e)  Contracts  Not  to  Be  Performed  Within  a  Year. — 
Subdivision  (5)  provides  that  no  action  shall  be  brought  to 
charge  any  person  upon  any  agreement  that  is  not  to  be  per- 
formed within  the  space  of  one  year  from  the  making  there- 
of unless  the  agreement,  or  some  memorandum  or  note 
thereof,  shall  be  in  writing  and  signed  by  the  party  to  be 
charged  therewith  or  by  some  person  thereunto  by  him  law- 
fully authorized. 

The  fact  that  the  contract  may  not  be,  or  is  not,  per- 
formed within  a  year,  does  not  bring  it  within  the  statute. 
The  essential  point  is,  ''Was  it  contemplated  by  the  parties 
that  the  agreement  was  not  to  be  performed  within  a  year 
from  the  date  of  the  making  thereof  ?  "   If  it  was,  the  statute 

"  with  this  general  statement  of  the  in  land  which  must  or  must  not  be 

matter  covered  by  this  subdivision,  In  writing,    thereunder,    until    we 

we  pass  the  consideration  of  spe-  come  to  the  subject  of  Real  Prop- 

eiflc  instances  and  types  of  interest  erty. 


DEPARTMENT  OF  LAW  77 

applies;  if  not,  then  it  does  not.  The  statute  does  not  apply, 
also,  where  there  is  even  a  remote  chance  or  possibility  of 
the  contract  being  performed  within  a  year.  ^^  But  it  does 
apply  where  the  agreement  could  not  possibly  be  fulfilled 
within  that  time.  ^®  Contracts  which  require  a  year  for  per- 
formance, are  not  within  the  statute  merely  from  that  fact.  ^^ 
Nor  those  where  the  thing  to  be  done  may  take  more 
than  a  year,  if  either  party  has  the  right  to  cancel  the  con- 
tract within  a  year.  ^^  An  agreement  does  not  fall  within 
the  section  if  that  which  one  of  the  parties  is  to  do,  is  all  to 
be  done  within  a  year.  This  rule  seems  to  be  quite  general 
in  the  United  States  except  in  some  states,  viz.,  Massachu- 
setts, Indiana,  Michigan,  Vermont,  Kentucky,  New  Hamp- 
shire and  New  York,  which  have  deviated  therefrom  only  so 
far  as  to  allow  a  recovery  in  an  action  of  assumpsit  by  the 
party  who  has  performed  his  part  of  the  agreement.  Here 
equitable  principles  apply  in  providing  a  remedy  where  the 
rigor  of  the  statute  forbade  it.  Equity  gives  a  remedy  to 
the  party  who  has  performed  his  part  of  the  contract. 
In  the  English  case  of  Britain  v.  Rossiter,  ^^  a  contract  of 
service,  not  to  be  performed  within  a  year,  was  broken  by 
the  employer,  who  discharged  the  plaintiff  after  some 
months  of  service.  An  action  was  brought  for  wrong- 
ful dismissal  and  the  court  of  appeal  held  that  the  equitable 
doctrine  of  part  performance  was  inapplicable.  "The  true 
ground  of  the  doctrine,"  said  Cotton,  L.  J.  "is,  that,  if  the 
court  found  a  man  in  occupation  of  land,  or  doing  such  acts 
with  regard  to  it  as  would  prima  facie  make  him  liable  to  an 
action  of  trespass,  the  court  would  hold  that  there  was 
strong  evidence  from  the  nature  of  the  use  of  the  land  that 
a  contract  existed,  and  would  therefore  allow  verbal  evi- 
dence to  be  given  to  show  the  real  circumstances  under 
which  possession  was  taken."  In  calculating  the  time  on 
contracts,  it  is  to  be  reckoned  from  the  day  they  are  made, 
not  from  the  time  of  beginning  the  performance  thereof.  ^" 

An  oral  agreement  not  to  do  a  certain  thing  is  not  with- 
in the  statute  as  the  promissor  may  not  live  a  year,  hence 
the  contract  might  terminate  within  the  statutory  period.  ] 

"Neal  V.  Parker,  98  Ind.,  254.  "Warner  v.  Texas  etc  Ry.  Co.,  164 
"Standard  Oil  Co.  v.  Denton,  24  Ky.  U.  S.,  418. 

L.  Rep.,  1581,  and  last  case  cited.  "Queen's  Bench,  Div.  123. 

"Derby  v.  Meyer,  10  Fed.  Rep.,  241.  *>  Shoop  v.  Rhice,  55  Mo.,  97. 


78         AMERICAN  EXTENSION  UNIVERSITY 

But  an  unwritten  agreement  to  not  do  a  certain  thing  for 
a  year  from  a  future  date  named,  is  invalid,  under  the 
statute.  ^^ 

§56.  Seventeenth  Section — Contracts  For  Sale  of 
Goods  and  Merchandise. — The  17th  section  of  the  statute 
enacts  that  no  contract  for  the  sale  of  any  goods,  wares,  and 
merchandises  for  the  price  of  £10  sterling  or  upwards  shall 
be  allowed  to  be  good,  except  the  buyer  shall  accept  part  of 
the  goods  so  sold,  and  actually  receive  the  same;  or  give 
something  in  earnest  to  bind  the  bargain,  or  in  part  pay- 
ment; or  that  some  note  or  memorandum  in  writing  of  the 
said  bargain  be  made  and  signed  by  the  parties  to  be  charg- 
ed by  such  contract,  or  their  agents  thereunto  authorized. 

(a)  In  General. — Under  this  section  it  is  not  neces- 
sary that  the  consideration  appear  in  writing  it  being  pre- 
sumed that  there  is  a  promise  to  pay  a  reasonable  sum.  The 
contract  of  sale  under  the  English  law  has  the  effect  of  a 
conveyance;  it  passes  the  property  in  the  thing  sold.  ^Put 
in  order  to  have  this  effect,  the  chattel — i.  e.  the  personal 
property — agreed  to  be  sold  must  be  specific,  and  nothing 
must  remain  to  be  done  to  make  the  chattel  complete  or  to 
ascertain  its  price,  as  weighing,  measuring  or  testing.  Such 
a  contract  is  called  an  executed  contract  of  sale.  In  case 
the  chattel  is  not  specific,  or  anything  remains  to  be  done  to 
complete  it,  the  property  does  not  pass  and  the  buyer  does 
not  acquire  a  right  in  rem,  in  the  thing  itself,  but  only  a 
right  in  personam  against  the  seller;  that  is,  a  right  of  action 
for  the  breach  of  the  agreement.  This  is  called  an  execu- 
tory contract.  When,  however,  the  chattel  is  complete  and 
the  property  passes  into  the  possession  of  the  purchaser,  the 
contract  is  an  executed  contract. 

It  was  long  questioned  whether  the  17th  section  applied 
to  an  executory  contract  of  sale,  and  the  matter  was  not 
set  at  rest  until  more  than  a  century  and  a  half  after  the  en- 
actment of  the  statute.  Finally,  Lord  Tenterden's  Act,  ^- 
provided  that  this  section  should  apply  to  all  contracts  for 
the  sale  of  goods  of  the  value  of  ten  pounds  sterling  and  up- 
wards, whether  executed  or  executory.  The  words  of  this 
section, — ''shall  be  allowed  to  be  good," — unlike  those  of 

«  Higgins  V.  Gager,  65  Ark.,  604.  "  Geo.  IV.  c.  14. 


DEPARTMENT  OF  LAW  79 

section  4, — go  to  the  existence  of  the  contract  itself  and  not 
merely  to  the  remedy.  There  are  several  English  decisions 
to  the  contrary,  however,  holding  that  both  the  4th  and  17th 
sections  relate  only  to  the  evidence  of  the  contract  which  is 
necessary  for  relief  in  court. 

(b)  What  This  Section  Includes. — ^It  is  somewhat  un- 
certain in  this  country,  just  what  is  included  under  this  sec- 
tion. Many  of  the  state  statutes  use  the  phrase  of  the  Eng- 
lish act — "goods,  wares,  and  merchandise."  Others  state 
''personal  property,"  while  still  others,  read,  "goods,  chat- 
tels, or  things  in  action."  This  varying  phraseology,  with 
the  varying  definitions  of  the  things  designated  thereby,  is 
the  cause  of  the  confusion  mentioned.  ^^  All  movable  per- 
sonal property  is  held  in  England,  to  be  included,  while  some 
states,  under  the  phrase,  "things  in  action,"  include  certain 
intangible  personal  property.  In  this  country,  it  is  held 
that  promissory  notes,  ^^  and  bonds,  and  corporate  stock,  ^^ 
are  goods,  wares  and  merchandise.  A  contract  for  work 
and  labor  is  not.  In  the  case  of  skilled  labor  upon  a  chattel 
it  has  been  laid  down  that  the  contract  is  for  the  sale  of 
goods  if  it  contemplates  the  ultimate  delivery  of  a  chattel.  ^^ 
This  rule  has  been  disapproved  in  several  of  the  states.  *^ 

(c)  Value  of  Goods. — If  no  value  is  stated  by  the  par- 
ties, the  question  whether  the  value  is  sufficient  to  bring  the 
contract  within  the  statute, — the  amount  being  $50  under 
the  American  statutes, — is  one  of  fact  for  the  jury. .  If  the 
amount  is  uncertain  at  the  time  of  making  the  contract,  and 
ultimately  exceeds  the  statutory  limit,  the  statute  applies.  ^^ 
Where  several  articles  are  sold  together,  the  value  of  each 
of  which,  by  itself,  is  less  than  the  statutory  limit,  but  which 
in  the  aggregate  exceeds  that  limit,  the  question  whether 
there  has  been  but  one  transaction  or  a  series  of  different 
transactions,  is  one  for  the  jury. 

(d)  Partial  Acceptance  and  Receipt. — An  acceptance 
and  receipt  of  part  of  the  goods  takes  the  contract  out  of 

"  20  Cyc.  243.  454;  Finney  v.  Opgar,  31  N.  J.  L., 

"Baldwin  v.   Williams,   3   Met.,   365.  270;  Cooks  v.    Millard.    65    N.    Y., 

But  the  contrary  was  held  in  Vaw-  360;   Meinicke  v.  Faulk,  55  Wis., 

ter  V.  Griffin,  40  Ind.,  593.  427. 
"Broadman  V.  Cutter,  128  Mass.,  388.      ^  Kaufman  v.   Farley    Mfg.    Co.,    78 

'"Lee  V.  Griffin,  1  B.  &  S.  272.  Iowa,   679;   Brown  v.  Sanborn,  21 

*^  Crockett  v.   Scriber,    64   Me.,    447;  Minn.,  402.    68  Cal.,  117. 

Goddard   v.    Binney,     115     Mass., 


80         AMERICAN  EXTENSION  UNIVERSITY 

the  statute.  In  considering  the  sufficiency  of  the  receipt 
axid  acceptance,  the  court  in  Jamison  v.  Simon,  ^^  said; 
"This  action  was  brought  to  recover  damages  alleged  to 
have  resulted  to  the  plaintiffs  by  reason  of  the  breach  by 
the  kfendants  of  a  contract  for  the  sale  of  a  certain  lot  of 
wool.  The  contract  was  oral  and  no  part  of  the  price  was 
paid.  Under  such  circumstances  the  contract  is  by  the 
statute  declared  to  be  invalid  unless  the  buyer  accepts  and 
receives  part  of  the  thing  sold.  By  the  terms  of  the  con- 
tract in  the  present  case,  the  wool  was  to  be  delivered  by  the 
plaintiffs  to  the  defendants  at  the  railroad  depot  in  Merced 
but,  as  says  the  vendee,  the  contract  was  invalid  in  law. 
That  the  wool  was  not  accepted  on  the  part  of  the  de- 
fendants because  of  its  alleged  dampness,  clearly  appears 
from  the  evidence.  Indeed,  the  objection  of  defendant's 
agent  to  accepting  the  wool  is  admitted  in  a  letter  put  in  evi- 
dence from  the  plaintiff,  Jamison,  to  his  co-plaintiff,  Stew- 
art, in  which  Jamison  says:  "The  wool  is  damp.  Mr.  Si- 
mon wants  me  to  discount  twenty-five  pounds  on  the  bale. 
I  am  not  willing  to  do  it.  We  have  agreed  to  wait  eight  or 
ten  days  after  the  rain  is  over,  to  weigh  the  wool  if  the 
dampness  is  out  of  it. ' '  The  evidence  further  shows  that  at 
the  expiration  of  the  time  agreed  upon,  Simon  still  refused 
to  accept  the  wool,  and  the  plaintiffs  then  sold  it  in  Merced 
at  the  highest  price  obtainable,  and  brought  this  suit  to  re- 
cover the  difference  between  the  amount  the  wool  would 
have  brought  at  the  price  fixed  in  the  oral  agreement  with 
the  defendants  and  the  amount  realized  by  the  sale.  But  as 
there  was  no  acceptance  of  the  property  on  the  part  of  the 
defendants  the  case  comes  within  the  statute  of  frauds,  and 
the  action  cannot  be  maintained.  There  may  be  a  construc- 
tive acceptance  while  the  goods  remain  in  the  hands  of  the 
vendor,  as  will  be  seen  later  on,  in  the  study  of  Contracts. 

(e)  Payment  of  Earnest  Money. — The  payment  of 
earnest  money,  or  part  of  the  purchase  price,  takes  the  tran- 
saction out  of  the  operation  of  the  statute.  Such  earnest 
money  may  be  paid  at  the  time  the  contract  is  entered  into 
or  afterwards.  ^® 

•  §57.    Memorandum  Required  By  Statute — (a)     Form. 
— The  form  of  the  memorandum  does  not  go  to  the  existence 

■  68  Cal.,  117.  '"Thompson  v,  Alger,  12  Mete,  425. 


DEPARTMENT  OF  LAW  81 

of  the  contract,  but  the  effect  of  a  non-compliance  with  the 
provisions  of  the  statute  is,  simply,  that  no  common  law  ac- 
tion can  be  brought  until  some  memorandum  or  other  writ- 
ing is  set  forth  as  a  basis  of  action.  Thus  the  note  or  mem- 
orandum may  be  made  so  as  to  satisfy  the  statute  at  any 
time  between  the  formation  of  the  contract  and  the  com- 
mencement of  an  action  thereon.  So,  too,  a  party  to  the  con- 
tract may  sign  a  rough  draft  of  its  terms,  and  acknowledge 
his  signature  when  the  draft  has  been  corrected,  and  the 
contract  is  actually  concluded.  Or,  a  proposal  containing 
the  names  of  the  parties  and  the  terms  of  the  suggested 
contract,  and  signed  by  the  proposer,  will  bind  him,  though 
the  contract  is  concluded  by  a  subsequent  parol  acceptance. 
Thus,  it  is  evident  that  the  form  is  evidentiary  matter  only, 
^ny  memorandum  however  informal,  is  sufficient  if  the 
agreement  is  clearly  stated  or  outlined  therein.  ^^ 

(b)  Parties. — The  names  of  the  parties  to  the  cqb- 
tract  must  appear  in  the  memorandum.  Such  omissions 
therefrom  cannot  be  shown  by  parol  evidence.  ^-  For  in- 
stance: A  promised  B  that  he  would  answer  for  the  debt 
or  default  of  C.  The  memorandum  of  the  promise,  though 
signed  by  A  did  not  contain  the  name  of  B;  it  was  held  to 
be  insufficient.  "No  document,"  it  was  said  in  that  case, 
* '  can  be  an  agreement,  or  memorandum  of  one,  which  does 
not  show  on  its  face  who  the  parties  making  the  agreement 
are.  ^^  It  is  settled,  however,  that  a  description  of  one  of 
the  contracting  parties,  though  he  be  not  named,  will  let  in 
parol  evidence,  otherwise  inadmissable,  to  show  his  iden- 
tity. ^^  This  may  occur  where  A  as  agent  for  B,  enters  into 
a  contract  with  X  in  his  own  name ;  X  may  prove  that  he  has 
really  contracted  with  B,  who  has  been  described  in  the 
memorandum  in  the  character  of  A.  On  the  other  hand,  A 
is  not  permitted  to  prove  that  he  is  not  the  real  party  to  the 
contract.  This  latter  rule  is  based  upon  the  law  of  estoppel, 
which  will  be  treated  under  the  subject  of  Equity  Juris- 
prudence. 

(c)  Substance. — The  memorandum  may  consist  of 
communications  by  mail  or  by  papers,  but  they  must  be  con- 

™Lash  V.  Paulin,  78  Mo.,  391.  ^  Fessenden    v.     Mussey,     11     Cush., 

'=  Nicholas  v.  Johnson,  10  Conn.,  192.  127;  Dykes  v.  Townsend,  24  N.  Y., 

^  Williams  v.  Lake,  2  E.  &  E.,  349.  57. 


82         AMERICAN  EXTENSION  UNIVERSITY 

nected,  consistent  and  complete.  The  only  sign^jjire  re- 
quired is  that  of  the  party  to  be  charged  thereby.  It  is  not 
therefore,  the  fact  of  the  agreement  but  the  terms,  and^^ll 
the  terms,  of  the  agreement  that  the  statute  requires  to^re 
expressed  in  writing.  The  terms  need  not  all  be  expressed 
in  the  same  document,  and  it  is  permissible  to  prove  a  mem- 
orandum from  several  papers,  or  from  a  correspondence, 
but  the  connection  of  the  various  terms  must  be  made  out 
from  the  papers  themselves,  and  may  not  be  shown  by  parol 
evidence.  ^^  The  following  is  an  example  of  insufficiency  of 
a  memorandum:  A  issued  a  prospectus  of  illustrations  of 
Shakespeare,  to  be  published  on  terms  of  subscription  con- 
tained therein.  B  entered  his  name  in  a  book  entitled 
"Shakespeare  Subscribers,  their  signatures,"  in  A's  shop. 
B  afterwards  refused  to  subscribe.  He  was  sued  upon  his 
promise  to  do  so,  and  it  was  held  that  there  was  no  documen- 
tary evidence  to  connect  the  subscription  book  with  the 
prospectus,  so  as  to  make  a  sufficient  memorandum  of  the 
contract,  and  that  the  deficiency  might  not  be  made  good 
by  parol  evidence.  ^® 

As  was  seen  under  the  subject  of  Offer  and  Acceptance, 
the  terms  of  the  contract  must  be  consistent,  and  so  must 
the  terms  of  a  contract  memorandum.  But,  although  the 
various  documents  in  which  the  terms  are  found  must  be 
perfectly  consistent  with  one  another,  yet  if  the  contract  is 
fully  set  out  in  writing  it  will  not  be  affected  by  a  repudia- 
tion of  it  contained  in  the  same  writing  and  signed  by  only 
one  of  the  parties.  They  have  agreed  upon  the  contract,  the 
statutory  evidence  is  thereby  supplied,  and  repudiation  is 
not  within  the  power  of  either  party,  alone,  to  make. 

(d)  Varying  Written  Terms  By  Parol  Evidence. — 
Where  a  contract  does  not  fall  within  the  statute,  the  par- 
ties may  (1)  put  their  agreement  into  writing;  (2)  contract 
only  by  parol;  or,  (3)  put  some  of  the  terms  in  writing  and 
arrange  others  by  parol.  ( In  the  latter  case,  although  that 
which  is  written  may  be  varied  by  parol  evidence,  yet  the 
terms  arranged  by  parol  are  proved  by  parol,  and  they  then 
supplement  the  writing,  and  so  form  one  entire  contract.^j 

"Adams  v.   McMillan,     7    Post,     73;  Co.,  63  Iowa,  730. 

Tallman  v.   Franklin,    14    N.    Y.,      '•  Boydell    v.    Drummond,    11    East., 
584;  Wall  v.  Wisconsin  Cranberry  142. 


DEPARTMENT  OF  LAW  83 

But  where  an  agreement  falls  within  the  statute,  all  its 
terms  must  be  in  writing,  and  parol  evidence  of  terms  not 
appearing  in  the  writing  would  altogether  invalidate  the 
contract,  as  showing  that  it  was  something  other  than  that 
which  appeared  in  the  written  memorandum. 

In  Beckwith  v.  Talbot,  ^^  the  United  States  Supreme 
Court  held  that  the  rule  excluding  parol  proof,  when  the 
contract  is  within  the  operation  of  the  statute,  is  subject  to 
exceptions.  In  that  case,  it  was  held  that  parol  proof,  if 
clear  and  satisfactory,  may  be  received  to  identify  the 
agreement  referred  to  in  the  collateral  papers  constituting 
the  memorandum.  ^* 

(e)  Must  State  Consideration. — ^The  consideration 
must  be  expressed  in  the  memorandum  of  all  contracts  af- 
fected by  the  4th  section  of  the  statute.  This  is  the  English 
rule  and  is  required  by  statute  in  Minnesota,  Oregon,  Ne- 
vada and  Alabama;  but  in  nearly  all  the  other  states  the 
statute  expressly  provides  that  the  consideration  need  not 
be  a  part  of  the  written  memorandum.  An  exception  has 
been  made,  however,  in  the  case  of  the  "promise  to  answer 
for  the  debt,  default  or  miscarriage  of  another,"  by  the 
English  Mercantile  Law  Amendment  Act,  providing  that  a 
consideration  need  not  be  shown  in  the  written  memoran- 
dum in  order  to  support  an  action. 

(f )  Who  Must  Sign  Memorandum. — The  memoran- 
dum must  be  signed  by  the  party  charged  or  his  agent.  ^® 
The  signature  need  not  be  an  actual  subscription  of  the  par- 
ty's name;  it  may  be  a  mark,  or  printed  or  stamped.  Nor 
need  it  be  placed  at  the  end  of  the  document;  it  may  be  at 
the  beginning  or  in  the  middle.  But  it  must  be  intended  as 
a  signature,  and  as  such  to  be  a  recognition  of  the  contract. 
Where  mutual  promises  are  the  consideration  of  a  contract, 
the  trend  of  authority  is  that  the  signature  of  the  party  to  be 
charged  alone  is  sufficient.  Upon  this  point  however  there 
is  a  conflict  of  decisions,  but  the  better  reasoning  seems  to 
be  with  that  of  the  case  of  Krohn  v.  Bantz,  ^^  in  which  the 
plaintiff  gave  his  promissory  note  for  goods  purchased  from 
the  defendant.     The  goods  were   not   delivered   and   the 

"  95  U.  S.,  237  230;  King  v.  Wood,  7  Mo.,  389. 

'*  See,  also.  Bishop    v.    Feltcher,    48  ^  Dressel  v.  Jordan,  104  Mass.,  407. 

Mich.,  555;   Fry  v.  Piatt,  32  Kan.,  «  68  Ind.,  277. 

62;  Drake  v.    Seaman,    97    N.    Y., 


84         AMERICAN  EXTENSION  UNIVERSITY 

maker  of  the  note  sued  for  a  breach  of  the  contract.  The 
defendant,  the  seller  of  the  goods,  contended  that  the  note 
was  an  insufficient  memorandum  of  the  contract,  and  his 
contention  was  sustained  by  the  court  on  the  ground  that  a 
promissory  note  is  not  a  part  payment,  and  that  as  a  mem- 
orandum, it  was  not  signed  by  the  defendant  the  party,  le- 
gally charged  to  deliver  the  goods.  ^^  The  agent,  signing 
may  be  the  agent  of  both  parties.  In  the  case  of  Baptist 
Church  V.  Bigelow,  ^^  the  trustees  of  the  church  brought  an 
action  to  recover  the  price  of  a  church  pew  sold  to  the  de- 
fendant at  public  auction.  The  defendant  bid  $60  for  a  pew 
designated  on  a  plan  of  the  church  and  it  was  struck  oft  to 
him,  the  clerk  writing  the  name  of  the  defendant,  and  the 
price  bid,  on  the  plan.  On  the  completion  of  the  church, 
the  defendant  refused  to  accept  a  deed  to  the  pew  and  also 
refused  to  pay  the  balance  due  on  his  bid,  therefore,  and  suit 
was  brought.  His  defense  was  that  the  sale  was  void  with- 
in the  statute  of  frauds  because  there  was  no  proper  note  or 
memorandum  in  writing,  signed  by  him,  it  being  a  contract 
for  the  sale  of  an  interest  in  land.  The  court  held  that  the 
writing  on  the  plan  of  the  church  contained  all  the  requisites 
of  a  legal  memorandum,  and  that  it  was  legally  signed  by 
him  as  the  party  to  be  charged,  the  auctioneer  being  the 
agent  of  both  parties  and  so  bound  the  defendant  by  signing 
the  defendant's  name  to  the  plan  of  the  church  which  memo- 
randum the  court  held  was  sufficient.  But  an  auctioneer's 
memorandum  in  order  to  be  binding,  must  be  made  at  the 
time  of  the  purchase.  In  Horton  v.  McCarthy,  ^^  the  auc- 
tioneer wrote  the  name  of  the  purchaser,  and  the  price  of 
the  land  sold,  on  a  slip  of  paper  which  contained  nothing 
else.  He  later,  at  his  office,  wrote  a  full  memorandum  of 
the  sale  in  his  office-book.  The  court  held  that  the  memo- 
randum made  at  the  auction  was  insufficient,  and  that  the 
book-entry  made  at  the  office  was  not  made  as  the  agent  of 
the  defendant,  his  agency  having  terminated  when  the  sale 
was  consummated. 

In  the  absence  of  statutory  provision  to  the  contrary 
an  agent's  authority  to  sign  a  memorandum  is  not  required 
to  be  in  writing  any  more  than  in  any  other  case  of  agen- 

"  To  the  contrary,  see  Perkins  V.  Hud-      "16  Wend.,  28. 
sell,  50  111.,  21,7.  «  53  Me.,  394. 


DEPARTMENT  OF  LAW  85 

cy.  UndCT  the  original  statute  of  frauds,  it  is  unnecessary 
that_th.e  agent's  authority  be  in  writing,  but  in  many  juris- 
dictions the  legislatures  have  specifically  provided  that  writ- 
ten authority  is  essential  to  enable  an  agent  to  make  a  bind- 
ing contract.  This  is  the  law  in  California,  Colorado,Illinois, 
Michigan,  Minnesota,  Missouri,  Nebraska,  North  Dakota, 
Pennsylvania  and  South  Dakota. 

§58.  Operation  and  Effect  of  Statute. — As  has  been 
said  before,  the  general  rule  is  that  a  contract  coming  with- 
in the  operation  of  the  statute  is  not  void,  but  is  merely  in- 
capable of  sustaining  an  action  at  law  to  enforce  it.  This 
rule  does  not  apply  in  cases  in  which  the  contract  is  collater- 
al to  the  cause  of  action.  In  some  states  the  statute  de- 
clares that  contracts  within  the  statute  and  not  meeting  its 
requirements,  are  absolutely  void. 

^  The  rules  of  construction  of  the  statute  are  unsettled. 
Some  courts  follow  the  English  construction;  some  hold  that 
the  statute  should  be  strictly  construed  in  cases  of  doubt; 
and  others  allow  more  or  less  latitude  in  construction,  espe- 
cially in  purely  mercantile  transactions.  ^* 

(The  statute  applies  to  contracts  made  by  corporations 
as  well  as  to  those  made  by  individuals.  It  does  not  extend 
to  obligations  implied  by  law,  and  hence  they  are  enforce- 
able although  there  is  no  writing  witnessing  them.  The 
statute  is  available  as  a  defense  only  to  a  party  or  parties 
to  the  contract,  and  no  one  else  can  take  advantage  of  it  or 
require  the  parties  to  do  so.  This  is  true  whether  the  con- 
tract be  for  the  sale  of  land,  or  of  goods,  wares  and  mer- 
chandise, or  is  in  the  nature  of  an  agreement  of  guaranty. 
For  instance,  one  who  has  fraudulently  prevented  a  contract 
from  being  carried  out  cannot  defend  on  the  ground  that  the 
contract  is  within  the  statute  and  therefore  unenforceable 
or  void. 

In  pleading  the  statute  it  is  necessary  to  take  notice  of 
certain  presumptions  arising  out  of  the  requirements  there- 
of. The  principal  presumptions  existing  uirtil  contradicted, 
are/that  a  contract  required  by  the  statute  to  be  in  writing 
is  in  writing.'  Also,  that  the  authority  of  an  agent  is  its 
writing,  y  If  a  party  to  a  suit  on  a  contract  wishes  to  show 

**  Greenville      v.      Greenville      Water  Ray,  58  Kan.,  585;  Baltimore  etc- 

Works  Co.,  125  Ala.,  625;  Rayl  v.  Ry.  Co.  v.  West,  57  Ohio  St.,  161, 


86         AMERICAN  EXTENSION  UNIVERSITY 

some  other  characteristic  of  a  contract,  which  will  bring  it 
within  the  statute,  he  must  plead  it,  as,  for  example,  that 
there  was  part  payment,  or  that  there  has  been  part  per- 
formance of  the  contract.  ^ 

§59.  Summary. — A  memorandum  is  incomplete  that 
does  not  evidence,  (1),  a  contract  concluded — so  far,  at 
least,  as  the  party  to  be  charged  is  concerned;  (2)  the  names 
of  both  of  the  contracting  parties;  (3),  the  subject  matter  of 
the  contract,  so  described  that  it  may  be  identified;  (4),  in 
contracts  for  sale,  the  terms  of  credit  and  the  price  agreed 
upon  where  the  price  and  terms  are  definite;  (5),  in  many 
states,  the  consideration  for  the  undertaking;  and  (6), 
under  the  statute  of  all  the  states,  the  signature  of  the  party 
to  be  charged  thereby,  or  this  agent.  ** 

"  Knowlton's    Anson    on     Contracts,  2nd  Amer.  Ed.,  p.  72,  n.  3. 


CHAPTER  VII. 

CONDITIONAL  CONTRACTS. 

§60.  Definition — Kinds   of   Conditions. 

61.  Conditions   Subsequent. 

62.  Conditions  Concurrent. 

63.  Conditions  Precedent. 

§60.  Definition — Kinds  of  Conditions.-(As  previously 
stated,  a  conditional  contract  is  one  which  goes  into  effect, 
or  is  determined  by,  the  happening  or  not  happening  of  a 
certain  event^  The  condition  may  be  (1)  subsequent;  (2) 
concurrent;  or  (3)  precedent.  In  the  first  class  of  condi- 
tions, the  rights  of  the  promisee  to  the  contract  are  deter- 
mined by  the  happening  of  the  stated  event.  In  the  second 
class  the  happening  of  the  event  and  the  rights  of  the  prom- 
isee, must  take  place  simultaneously.  In  the  third  class, 
the  prescribed  event  must  occur  before  the  rights  of  the 
promisee  under  the  contract  arise.  Conditional  contracts, 
like  all  others,  require  mutuality,  and  if  that  is  destroyed  by 
the  condition  the  latter  fails  for  lack  of  consideration.  Fail- 
ure of  the  promisee  to  fulfill  the  condition,  generally  dis- 
charges the  promisor  from  liability. 

§61.  Conditions  Subsequent. — Conditions  subsequent 
are  those  which  determine  the  rights  of  the  parties  to  a  con- 


DEPARTMENT  OF  LAW  87 

tract,  as  regards  its  conclusion  or  performance.]  Such  con- 
ditions are  usually  anticipated  by  some  expression  in  the 
contract,  or  there  is  some  liiintingent  circumstance  which 
terminates  the  existence  of  the  contractual  relation.  This 
circumstance  may  be  any  one  or  more  of  any  conceivable 
kinds  of  happenings  or  events,  which  may  be  agreed  upon 
by  the  parties  to  terminate  the  contract  upon  its  coming  or 
not  coming  to  pass.  ^ 

§62.  Conditions  Concurrent. — In  the  case  of  concur- 
rent conditions  the  promisee's  rights  are  dependent  upon 
his  performance  of  some  act  simultaneously  with  the  per- 
formance by  the  promisor.  Thus,  if  the  promisor  commen- 
ces performance  under  the  contract,  and  the  promises  are 
conditional  upon  a  simultaneous  performance,  the  promisee 
must  also  then  commence  performance.  If  the  latter  is  not 
willing  and  ready  to  perform,  the  former  is  discharged  from 
performance.)  \This  form  of  condition  is  more  particularly 
applicable  to  contracts  of  sale,  where  payment  and  delivery 
are  assumed, — ^in  the  absence  of  express  stipulation, — to  be 
intended  to  be  contemporaneous.  (The  seller  cannot  de- 
mand payment  of  the  price,  nor  can  the  buyer  demand  de- 
livery of  the  goods,  unless  each  is  ready  to  perform  his  part 
of  the  contract.  ^  \ 

§63.  Conditions  Precedent.-f-In  the  case  of  conditions 
precedent  the  promisee's  rights  do  not  arise  until  some  act 
has  been  performed  either  by  one  of  the  contracting  parties 
or  by  a  third  party,  or  until  a  specified  time  has  elapsed./ 
One  form  of  condition  precedent,  acts  as  a  suspension  or 
performance  of  the  contract.  fA  breach  of  it  does  not  dis- 
charge the  contract,  but,  in  case  of  non-fulfillment,  no  liabil- 
ity ever  arises  thereon.)  (Insurance  contracts,  and  surety 
bondings  are  based  upon  this  form  of  precedent  condition. 
In  fact,  any  condition  which  suspends  the  operation  of  a 
contract  for  an  uncertain  length  of  time,  and  which  may 
never  occur,  is  an  example  of  this  class  of  conditions — some- 
times called  floating  or  suspensory,  conditions.  ]  The  condi- 
tion may  be  the  lapse  of  a  certain  time ;  or  the  performance 
of  some  act  by  one  of  the  parties  in  an  unspecified  time;  or 

*Ray  V.  Thompson,  12  Cush.,  281.  Scales,    55    Ind.,    282;     Phelps    v.- 

» Smith  V.  Lewis,  26  Conn.,  110;  How  Hubbard,  51  Vt.,  489. 

V.  Rawson,  17  111.,  588;   Posey  v. 


88         AMERICAN  EXTENSION  UNIVERSITY 

the  giving  of  notice  by  one  of  the  parties.  In  all  these 
cases  if  the  condition  is  not  fulfilled  the  contract  is  not  dis- 
charged. ^  vUntil  then  it  is  merely  a  sort  of  option,  or  agree- 
ment dependent  upon  the  natural  sequence  of  events,  or  the 
volition  of  one  of  the  parties.  (Those  conditions  precedent 
which  effect  a  discharge  of  a  contract  are  the  essence  of  the 
contract,  and  a  breach  always  gives  a  right  of  action^' 
Thus,  if  a  person  promises  to  work  for  another,  and  the  lat- 
ter promises  to  pay  a  certain  compensation  in  return  for 
that  work,  the  work  is  impliedly  that  which  must  be  first 
performed,  and  then  the  party  agreeing  to  pay  must  per- 
form, or  be  liable  for  a  breach  of  contract,  upon  proof  of 
performance  by  the  one  doing  the  work. 

[Great  difficulty  is  experienced,  in  some  cases,  in  deter- 
mining whether  a  promise  is  a  warranty,  or  a  condition  pre- 
cedent to  the  obligation  imposed  upon  the  promisee.  An 
undertaking  that  goods  to  be  sold  and  delivered  shall  pos- 
sess a  certain  quality,  whether  in  the  form  of  a  description 
or  of  a  warranty,  is  a  condition,  the  performance  of  which 
is  precedent  to  the  duty  of  paying  therefor  imposed  by  the 
contract  upon  the  vendee.  In  Pope  v.  Allis,  ^  the  plaintiff 
bought  through  brokers  500  tons  of  iron  with  the  under- 
standing that  it  to  be  "No.  1"  quality,  delivered  in  Milwau- 
kee. After  delivery  and  examination  the  plaintiff  refused 
to  accept  the  iron,  although  it  had  been  paid  for  by  his 
agents.  Defendant  refused  to  reimburse  the  plaintiff, 
claiming  that  the  latter  could  not  rescind  the  contract,  as 
there  was  only  a  breach  of  warranty.  The  court  rendered 
a  decision  to  the  effect  that  the  contract  did  not  become  an 
executed  contract  until  the  condition  as  to  the  quality  of  the 
iron  was  complied  with.  The  jury  having  found  the  iron  to 
be  other  than  of  "No.  1"  quality,  the  condition  was  treated 
as  of  the  essence  of  the  contract,  and  its  breach  gave  the 
plaintiff  the  right  to  rescind  and  to  recover  the  money 
paid.  An  acquiescence  in  a  breach  of  a  condition  prece- 
dent, however,  turns  it  into  a  warranty;  but  payment  of  the 
consideration  is  not  necessarily  a  waiver  of  the  right  to 
treat  the  contract  as  discharged. 

"Bruce  v.  Snow,  20  N.  H.,  484.  •  115  U.  S.,  363. 

*Van  Home  v.  Torrance,  2  Fal.,  304. 


DEPARMENT  OF  LAW  89 


CHAPTER  VIII. 

QUASI  CONTRACTS. 


§64.  In  General — Kinds. 

65.  Money  Paid. 

66.  Money  Received. 

67.  Use  and  Occupation. 

68.  Work   and    Services. 

69.  Where  Tort  Is  Waived. 

§64.  In  General — Kinds. — Our  definition  of  quasi  con- 
tracts revealed  that  the  legal  obligations  thus  termed  are 
simply  the  law's  method  of  compelling  a  party  who  has  re- 
ceived, or  by  his  own  act  obtained  from  another  something 
of  value  except  by  way  of  voluntary  gift,  to  pay  a  fair  price 
therefor  even  though  no  agreement  express  or  implied  so  to 
do,  had  been  given  previously  to  obtaining  such  value.  In 
short,  quasi_contracts  are  legal  fictions. )  That  is,  where  no 
promise  was  actually  made  to  compensate  for  benefits  re- 
ceived, under  circumstances  warranting  the  presumption 
that  pay  therefor  was  expected,  the  law  makes  believe  that 
such  promise  was  made,  and  so  compels  the  recipient,  upon 
the  other's  demand,  to  pay  what  is  reasonable  therefor. 
For  instance :  A  ihan  steals  my  horse  and  sells  it  for  $100. 
The  law  says  I  may  waive  the  tort  and  recover  the  money 
received  by  the  thief  for  the  animal,  if  I  desire  to  do  so. 
Why?  Because  the  law,  in  order  to  protect  my  legal  right 
to  the  money,  and  enforce  against  the  thief  his  legal  duty 
to  surrender  it  to  me,  implies  a  promise,  that  is,  feigns  a 
promise  where  there  was  none  in  fact,  in  order  to  support 
my  legal  right  to  the  money.  All  I  have  to  do  in  such  a  case 
is  to  prove  that  the  defendant,  without  right,  sold  my  horse 
for  cash,  which  he  still  retains. 

^^  Quasi  contracts  arise  from  the  following  reasons:  (1) 
Money  paid;  (2)  Money  received;  (3)  Use  and  occupation; 
(4)  Work  and  services;  (5)  Where  a  tort  is  waived  and  suit 
is  brought  in  assumpsit. 

§65.  Money  Paid — Where  a  person  paj^s  money  for 
another — not  at  his  request  which  would  thus  constitute  an 
implied  contract,  but  under  circumstances  where  the  re- 
cipient with  full  knowledge  of  the  payment  accepts  the  ben- 
efit thereby  done  him, — ^the  law  will  require  him  to  reim- 
burse the  party  who  so  paid  the  money.     For  example :    A 

•Ante  §4,  (c) 


90         AMERICAN  EXTENSION  UNIVERSITY 

man,  not  a  party  to  a  note,  was  asked  by  a  third  person  in 
the  presence  of  the  maker,  to  pay  it.  Such  party  did  so,  and 
receiving  the  note,  handed  it  to  the  maker,  saying:  "Pay 
me  the  amount  of  the  note  sometime."  On  suit  brought 
upon  these  facts,  the  court  held  that  the  maker  of  the  note 
receiving  the  benefit  of  such  payment  without  objection, 
and  knowing  of  the  request  to  pay  it,  and  his  acceptance  of 
the  paid  note,  raised  an  implied  promise  on  his  part  to  re- 
imburse the  party  who  took  it  up.  ^  As  a  general  principle 
of  law,  money  paid  under  mistake  of  fact  can  be  recovered;  ^ 
but  money  paid  under  a  mistake  of  law  cannot.  ^  Upon  like 
principles  to  those  stated  above,  money  paid  under  duress, 
or  undue  influence,  or  by  misrepresentations,  can  be  recov- 
ered at  law. " 

§66.  Money  Received. — Actions  under  this  title  can  be 
maintained  where  one  party  has  received  money  belonging 
to  another,  and  which  he  ought  in  equity  and  good  con- 
science to  pay  to  such  other.  Privity  of  contract  is  not  ile- 
cessary  in  this  class  of  actions.  Money  collected  for  an- 
other and  withheld;  and  money  given  to  another  for  a  spec- 
ified purpose,  but  not  applied  as  directed;  are  familiar  illu- 
strations of  the  class  of  cases  included  under  this  right  of 
action. ' 

§67.  Use  and  Occupation.— Wliere  a  person,  without 
legal  right,  or  without  having  previously  so  arranged  with 
the  owner  or  his  agent,  enters  into  the  possession  of  prem- 
ises— whether  houses  or  lands,  or  both — and  occupies  and 
uses  them,  the  law  presumes  a  promise  on  his  part  to  pay  the 
reasonable  value  of  such  use  and  occupation.  It  will  there- 
fore uphold  a  claim  by  the  owner  for  the  recovery  of  such 
value.  ^  / 

§68.  Work  and  Services. — Where  one  does  an  act,or 
renders  a  service,  for  another  person  who  is  under  a  moral 

*Briguier  v.  Coeney,  39  la.,  190;  Poe  *  Arnold  v.  Ga.,  Ry.  Co.,  50  Ga.,  304; 

V.  Dorrah,  20  Ala.,  2  88;    Watkins  Chandler    v.    Sanger,    114     Mass., 

V.  Richmond  College,  41  Mo.,  302.  364;     Ligonies    v.    Ackerman,     46 

» Newell   V.     Smith,     53     Conn.,     72;  Ind.,  552. 

Espey  V.  Cincinnati  Bank,  18  Wall  'Curtis  v.  Pawly,  107  Cal.,  257. 

(U.  S.),  603.  '  Benter  v.  Craig,  2  Mo.,  198;   Guth- 

*  United  States  Bank  v.  Daniel,  12  Pe-  rie  v.  Hyatt,  1  Har.,  446. 

ters  33;    Richardson  v.   Dever,   17  'Skinner   v.    Skinner,    38    Neb.,    756. 

Col.,  398. 


DEPAETMENT  OF  LAW  91 

and  legal  obligation  to  do  such  act  or  service,  and  it  is  so 
done  under  such  circumstances  of  urgent  necessity  that  com- 
mon decency  would  not  sanction  delay  in  so  doing,  the  law 
gives  the  performer  of  such  labor  a  right  to  recover  of  the 
other  party  what  such  service  was  fairly  worth,  even  though 
no  promise  or  inducement  was  given  therefor  by  such 
party.  ^  Burial  of  one's  wife  in  the  absence  of  the  husband, 
his  whereabouts  being  unknown;  and  providing  a  sick  child 
with  medical  attendance  and  nursing,  the  father  having 
abandoned  it;  are  illustrations  of  this  feature  of  such  con- 
tracts ;  ^°  as,  too,  is  the  case  of  making  provision  for  a  fam- 
ily driven  from  their  home  by  a  brutal  husband  and  father.  ^^ 
Again,  where  one  accepts  the  services  of  another,  under 
circumstances  showing  that  they  were  not  gratuitously 
given;  ^^  and  where  services  are  rendered  without  any  agree- 
ment as  to  the  compensation  therefor,  ^^  a  like  liability,  and 
right  of  action,  are  created,  although  they  more  clearly  re- 
semble implied,  rather  than  quasi,  contracts. 

§69.  Where  Tort  is  Waived. — ^Any  action  to  recover 
for  a  wrong  done  another,  could  formerly  be  brought  only 
for  damages  for  the  tort.  Certain  classes  of  torts,  however, 
are  now  regarded  as  having  created  a  contractual  obligation, 
giving  the  wronged  party,  therefore,  the  right  of  waiving 
the  tort,  if  he  wishes  so  to  do,  and  suing  the  wrong  doer  in 
an  action  of  assumpsit  as  for  a  legal  debt. :  Such  a  case  is 
where  one,  having  lawful  possession  of  personal  property 
of  another  for  safe  keeping,  or  to  be  used  according  to  direc- 
tions of  the  owner,  converts  the  same  to  his  own  use  by  sell- 
ing it.  tflhe  owner  may,  in  such  event,  sue,  either  on  the 
tort,  and  get  damages,  or  for  the  value  of  the  goods,  in  an 
action  of  contract.  ^1/,'  In  suing  as  on  contract,  his  recovery 
is  limited  to  the  amount  actually  received  for  the  goods  by 
the  wrong  doer,  ^^j  To  sustain  such  an  action  the  goods  must 
have  been  sold, — not  exchanged  or  bartered;  ^^  the  wrong 

•Force  v.  Harnes,  17  N.  J.,  Eq.,  389;  348;  Blaisdell  v.  Gladwin,  4  Cush., 

Patterson  v.  Patterson,    59    N.    Y.,  373. 

582.  "White  v.  Brooks,  43    N.    H.,    402; 

"Ambrose  v.  Kerrison,  10  C.  B.,  776.  Bowman    v.    Browning,     17     Ark., 

"Ray  V.  Alden,  50  N.  H.,  83.  599;   Watson  v.  Stever,  25    Mich., 

"Shelton    v.    Johnson,    40     la.,     84;  386. 

Viley  V.  Pettit,  96  Ky.,  576.  »  Saville  v.  Welch,   58  Vt.,  683. 

"Spearman   v.     Texarkana,     4     Ark.,  "Fuller  v.  Duren,  36  Ala.,  73. 


92         AMERICAN  EXTENSION  UNIVERSITY 

doer  must  have  received  a  benefit;  and  the  owner  a  detri- 
ment or  loss.  ^^  Obtaining  another's  money  wrongfully, 
and  the  wrongful  use  of  another's  real  property,  are  addi- 
tional instances  where  such  a  right  may  be  executed.  ) 

"Webster  v.  Drinkwater,  5  Me.,  319. 


QUIZZER. 

STATUTE   OF  FRAUDS. 

l-§52.  Define  the  statute  of  frauds. 

2-  Has  each  state  such  a  statute? 

3-§53.  State  its  origin  and  purpose  fully. 

4-  What  was  the  title  of  the  original  act  ? 

5-  '      What  can  you  say  as  to  the  comprehensiveness  of 

the  original  act? 

6-  What  sections  thereof  have  been  generally  adopt- 

ed in  this  country?  ''-  • 

7-  What  was  the  legal  effect  on  contracts  under  the 

statute  ? 

8-  Did  the  act  affect  validity  of  contract?    If  not, 

to  what  did  it  apply? 

9-  Has  the  characteristic  of  the  English  Act  been 

generally  followed  in  this  country? 

10-  State  any  exceptions  thereto.  •':. 

11-  State  the  practical  distinction  between  the  two 

classes  of  provisions  in  this  country. 

12-§54.  What  is  the  most  important  class  of  contracts  af- 
fected by  the  statute ?  (''  ;:     :  -  , .  ' ' . 

13-  To  what  class  of  contracts  under  the  statute  is  our 

present  attention  directed — and  why? 

14-§55.  What  does  subdivision  (1)  of  section  4  of  the 
statute  provide? 

15- (a)  Wliat  is  necessary  for  the  statute  to  apply  under 
this  subdivision? 

16-  When  is  the  promise  presumed  to  be  in  behalf  of 

the  estate? 

17-  What  must  the  promise  be  ? 

18-  What  were  the  facts  and  holding  in  the  case  of 

Meade  V.Bowles? 
19- (b)      What  does  subdivision  (2)  of  section  4  provide? 
20-  What  are  the  essentials  of  a  contract  in  order  to 

bring  it  within  this  subdivision? 


•/ 


DEPARTMENT  OF  LAW  93 

21-  Does  the  statute  apply  to  an  original  promise  not 

in  writing? 

22-  What  are  sureties  ? 

23-  What  is  the  nature  of  their  promise  ? 

24-  What  is  the  nature  of  the  promise  in  a  recogniz- 

25-  Upon  what  does  the  rule  seem  to  be  based?    '"^"^3**^°*^ 

26-  What  is  the  important_test  under  this  provision 

of  the  statute?  ^22/^X^*X.  ^  oo>U,aJt^aJ-  - 

27-  What  determines  whether  the  promise  is  original 

or  collateral? 

28-  Does  relationship  determine — if  so  when?  <K4-. 

29-  Is  a  promise  to  a  debtor  to  pay  his  debt  due  to  an- 

other within  the  statute  ? 

30-  What  was  the  case  of  Vogel  v.  Melms  ? 

31- (c)       What  does  subdivision  (3)  of  section  4  provide? 

32-  In  what  case  does  the  provision  not  apply? 

33-  What  must  be  the  nature  of  the  promise  so  far  as 

consideration  is  concerned? 

34-  Cite  a  case  on  this  point. 

35-  (d)      What  does  subdivision  (4)  of  section  4  provide  ? 

36-  What  interests  are  not  within  this  provision? 

37-  Give  an  example. 

38-  Define  "Fructus  Naturales,"  and  *'Fructus  In- 

dustriales. ' ' 

39-  To  which,  as  a  general  rule,  does  the  statute 

apply? 

40-  Does  this  subdivision  apply  to  crops  severed  from 

the  soil? 
41- (e)       What  does  subdivision  (5)  of  section  4  provide  ? 

42-  What  is  the  essential  point  to  bring  a  contract 

under  this  provision?  t7>^vvt^ -— '  *p^-Oun^ 

43-  State  fully  the  conditions  when  a  contract  will, 

and  when  it  will  not,  fall  within  this  provision? 

44-  Give  at  least  two  illustrations  of  cases  within  the 

last  question? 

45-  What  principles  apply  in  case  an  oral  contract 

was  to  be  performed  in  less  than  a  year,  and 
one  party  had  performed? 

46-  What  did  the  case  of  Britain  v.  Rossiter  decide? 
i  '47-§56.     What  does  the  17th  section  of  the  statute  provide? 


94         AMERICAN  EXTENSION  UNIVERSITY 

48- (a)      Need  the  consideration  appear  in  the  memoran- 
dum— and  why?     ■. 

49-  What  was  the  legal  effect,  under  the  English  stat- 

ute, of  a  contract  of  conveyance  ? 

50-  What  must  be  the  condition  of  a  chattel  sold,  to 

obtain  the  benefit  of  the  legal  effect  referred  to  ^^ 

51-  What  is  an  executed  contract  of  sale?  C'v-^-'c^^^'^  ^ 

52-  What  is  an  executory  contract  of  sale?  '\\a5^^ 

53-  What  remedy  exists  for  the  breach  of  an  execu- 

tory contract  ?  ft.     i  (^1  ^ 

54-  What  did  Lord  Tenterden's  Act  provide?  ^*'**"  ^^ 

55-  What  is  legal  effect  on  a  contract  of  the  words — 

"shall  be  allowed  to  be  good" — in  this  section? 
56- (b)      Does  this  differ  at  all,  if  so,  how,  from  the  provi- 
sions of  4th  section?  ^ 

57-  Are  the  English  decisions  uniform  on  this  point  ?  "^ 

58-  Is  there  any  uncertainty  as  to  what  is  included 

within  the  phrase, ' '  goods,  wares  and  merchan- 
dise?" 

59-  State  the  varying  statutory  phrases  in  this  coun- 

try analogous  to  this  provision. 

60-  Is  a  contract  for  stocks  or  bonds,  within  the  stat- 

ute, in  this  country  ?     V      "  - 

61-  When  is  a  contract  for  work  and  labor  within  the 

statute?  (\AAr^ 

62- (c)      When  the  value  is  uncertain  how  is  it  decided?  J)^  i 
63-  When  there  is  a  series  of  transactions  what  fact 

is  necessary  to  be  determined?  (^vn^  ^  ^xsl  sv*''-^^ 
64- (d)      What  will  take  a  contract  for  goods,  wares,  and 

merchandise,  out  of  the  statute?  (v^e-xJ^M«^^-^^ 
65-  Give  the  facts  and  holding  in  Jamison  v.  Sinion<2j^^ 

66- (e)       What  effect  does  part  payment  have  ?  '        \^ 
67-  Can  there  be  a  constructive  acceptance  by  a  ven- 

dee? 
68- §57     Does  the  form  of  the  memorandum  required,  af- 
(a)        feet  the  contract's  validity?   >\o 

69-  What  is  the  effect  of  a  non-compliance  with  the 

statute  as  to  the  memorandum? 

70-  When  may  the  note  or  memorandum  be  made  ? 

71-  What  is  the  purpose  of  the  form  of  the  memoran- 

dum? 
72- (b)      What  must  appear  in  the  memorandum?  y^O^'C'^^^W 


DEPARTMENT  OP  LAW  95 

73-  When  may  parol  evidence  be  used  to  establish  the 

identity  of  a  party  to  a  contract?   -<  - >--,.'<- 

74-  Give  an  example  showing  the  admissibility  of  pa-       y 

rol  evidence  to  prove  the  identity  of  a  party.  A-  =^'i^ 
75- (c)  •    May  the  memorandum  consist  of  separate  com- 
munications?  '^-^  (-crw^Ko^c^Gi,^- <>-; -,. 

76-  What  is  required  in  such  a  case  %.a.^cJX^c-^^  s^  O^^-'^'f*^^ 

77-  How  does  estoppel  apply  in  the  proof  of  a  memor- 

andum? 

78-  Whose  signature  .must  appear  in  the  memoran- 

dum?lC^  .|  ti^...  p'v-.--;  "c  've^  L.\ 

79-  Does  the  fact  that  there  is  an  agreement  need  to_i^ 

be  expressed?   ^vvr-  U^V  tlvCtt%-^t<3-^<L^<  tl>f,^<3 

80-  Give  an  example  of  a  disconnected  memorandum? 

81-  Will  a  written  repudiation  by  one  party  alone  af- 

fect the  contract?    'VviX" 

82-  What  is  essential  as  to  terms  of  the  agreement,  as 

shown  by  disconnected  writings  ?  •  ^ 

83-  ^    State  the  three  methods  which  parties  may  use  in    '    '",' 

making  contracts  not  within  the  statute?  '  '■'    "'  •  '^'  ■"■' 

84-  What  is  the  rule  as  to  the  admissibility  of  parol 

evidence  in  such  cases? 

85-  Can  parol  evidence  be  used  in  connection  with 

contracts  with  the  statute  ?       . 

86-  What  is  requisite  as  to  the  written  memorandum 

of  contracts  within  the  statute  ? 
87- (e)       What  is  the  English  rule  as  to  consideration  un- 
der the  fourth  section?  Wu^^  ^  q^j^^aa^^aaJ^      ^^^ 

88-  What  is  the  general  rule  in  the  United  States?/^  /  pL 

89-  What  exception  is  there  to  this  rule  ?  ""^T^^^^it^       ' 

90-  Name  the  states  in  which  the  statute  requiresthe>''i*'>w 

memorandum  to  express  the  consideration  ?ti(Z/u£/^^' 
91- (f)      By  whom  must  the  memorandum  be  signed?  ^^^^^^^ 

92-  Need  the  party  to  be  charged  sign  it  personally^^'^^jT! 

93-  If  not,  by  whom  else  can  it  be  done,  and  in  what  .' 

manner,  and  where?   '"^-^  /-  "  ^'^<  * 

94-  What  is  the  rule  w^here  mutual  promises  are  the 

consideration? 

95-  What  did  Krohn  v.  Bantz  decide  ?  / 1 ,  <^i 

96-  What  were  the   facts    and   holding   in   Baptist 

Church  V.  Bigelow?   (o^"^*  / 

97-  What  was  the  ruling  in  fiorton  v.  McCarty?  X  »  ^« 


96         AMERICAN  E;XTENSI0N  UNIVERSITY 

98-  Need  the  agent's  authority  be  in  writing?   \^^  ^    "" 

99-  Does  your  state  so  provide  ?        ^ 

100-§58.    Is  a  contract  which  is  contrary  to  the  statute, 
void? 

101-  Does  the  statute  apply  to  collateral  contracts 

used  as  evidence? 

102-  What  is  the  law  in  some  states  as  to  voidability?  ^^t 

103-  What  are  the  three  methods  of  construction  of 

the  statute? 

104-  Does  the  statute  apply  to  contracts  by  corpora- 

tions?   V;,- 

105-  Does  the  statute  apply  to  implied  contracts? 

106-  To  whom  is  the  statute  available  as  a  defense, — 

and  in  what  cases  ? 

107-  What  presumptions  are  there  in  pleading  a  con- 

tract under  the  statute  ? 
108-§59.     Summarize  the  general  requisites  of  the  memo- 
randum. '     .'       ^-  ^       ^  , 

l-§60.     What  is  a  conditional  contract?        \n   4^'^ 

2-  Name  the  different  kinds  of  conditions^  affecting  . 

contracts'.  ■  •  *^  C^caa^j^^wv/t;  j  y^  ^c  <&/>^ 

3-  What  are  the  distinguishing  features  of  each  of  the 

several  conditions  affecting  contracts  ? 
4-§61.     What  is  a  condition  subsequent? 

5-  How  are  such  conditions  usually  anticipated  in 

contracts? 

6-  What  circumstances  may  be  the  basis  of  a  contrac- 

tual condition?  *'.  V  .      ^Kjyr^J^^^v^A^fi^^^^ 

7-§62.    What  are  conditions  concurrent  ?    Illustrate. 
8-  To  what  contracts  is  this  form  of  condition  partic- 

ularly applicable  ? 
9-§63.    What  are  conditions  precedent? 

10-  When  do  the  promisee's  rights  arise  under  condi- 

tions precedent? 

11-  Give  illustrations  of  common  forms  of  contract 

containing  conditions  precedent. 

12-  What  are  conditions  precedent  sometimes  called? 

13-  What  may  be  the  nature  of  a  condition  precedent 

as  to  its  fact?    Illustrate. 


CONDITIONAL    CONTRACTS.  .     n  ,_.^(5l  ^^ 


DEPARTMENT  OF  LAW  97 

14-  Of  what  relation  to  a  contract  are  conditions  pre- 

cedent which  effect  a  discharge  of  the  contract  ? 
Illustrate. 

15-  With  what  other  factor  of  contracts  are  conditions 

sometimes  confused? 

16-  State  the  facts  and  the  decision  in  the  case  of  Pope       d^C 

V.  AUis.  .  . , .        >    ..  ^,  (^^ 

17-  What  effect  upon  a  condition  precedent  has  an  ac- 

quiesence  in  a  breach  therefor?  -iO^e^ 

18-  Does  payment  of  the  consideration  waive  the  right 

to  treat  the  contract  as  discharged?  'J  l-o- 


QUASI  CONTRACTS 

l-§64.  What  is  the  nature  of  a  quasi  contract  ? 

2-  State  fully  the  characteristics  of  quasi  contracts. 

3-  State  a  case  of  the  nature  of  a  quasi  contract. 

4-  From  what  five  reasons  or  causes  do  quasi  con- 

tracts arise? 
5-§65.    When  does  the  payment  of  monej^  by  one  person 
for  another  create  a  quasi  contract  ?  Illustrate; 

6-  Can  money  paid  under  a  mistake  of  fact  be  re- 

covered? 

7-  Same,  as  to  money  paid  under  a  mistake  of  law? 

8-  Can  money  paid  under  duress,  or  by  undue  influ- 

ence, or  misrepresentation,  be  recovered — if  so, 
upon  what  principle? 
9- §66.    When  can  money  received  by  one  party  but  be- 
longing to  another  be  recovered,  and  on  what 
principle  ? 

10-  Is  privity  of  contract  necessary  in  this  class  of  ac- 

tion? 

11-  Give  familiar  illustrations  of  this  class  of  cases. 
12- §67.    What  can  you  say  as  to  use  and  occupation  being 

the  basis  of  a  quasi  contract  ?    State  fully. 

13-§68.  Can  one  who  does  work,  or  renders  services,  for 
another  recover  payment  therefore  as  on  a 
quasi  contract?    Illustrate. 

14- §69.  What  class  of  actions  were  formerly  the  sole  rem- 
edy for  a  wrong  done  by  one  to  another? 

15-  How  are  certain  classes  of  such  wrongs  now  re- 

garded and  what  legal  rights  arise  therefrom? 


98         AMERICAN  EXTENSION  UNIVERSITY 

LESSON  7.— 

CHAPTER  IX. 

OPERATION  OP  CONTRACTS. 

§70.  Contractual    Obligation    When    Enforceable  by  Third  Party. 

71.  Privity    of    Contract. 

72.  Same — Changes  in  Common  Law  Rule. 

73.  Acquirement    of    Contract    Rights   by   Third   Parties. 

(a)  By    Novation. 

(b)  By   Subrogation. 

(c)   By   Assignment   of   Contract. 

74.  Unassignable    Contracts. 

75.  Assignability   of   Right   of   Action  on  Contracts. 

76.  Notice  of  Assignment. 

77.  Assignment    of    Negotiable    Instruments. 

78.  Assignment    by    Operation    of  Law. 

§70.  Contractual  Obligations  When  Enforceable  By 
Third  Party. — While,  as  has  been  stated,  contractual 
rights  are,  in  general,  conferred  only  upon  those  who  have 
taken  contractual  obligations,  still  there  are  some  circum- 
stances whereunder,  as  has  also  been  said,  one  not  a  direct 
party  to  the  agreement  can  enforce  its  provisions  made — 
actually  or  impliedly — for  his  benefit.  For  instance,  where 
one  party  deeds  property  to  another,  specifically  directing 
that  the  grantee  hold  it  for  the  benefit  of  a  third  person, 
such  third  person,  although  not  a  party  to  the  contract  it- 
self, and  hence  under  no  contractual  obligation,  can,  in 
equity,  compel  the  grantee  to  observe  the  conditions  of  the 
conveyance.  ^  [  While  one  can,  under  circumstances  similar 
to  the  illustration  given,  enforce  a  contract  to  which  he  is 
not  a  party,  one  cannot,  on  the  contrary,  have  legal  liability 
imposed  upoij  him  under  a  contract  in  which  he  did  not 
participate.  ^  ) 

§70.  Privity  of  Contract. — From  the  foregoing  it  is 
seen  that  the  relation  whereby  contractual  rights  and  du- 

'  Newton  v.  Taylor,  32  Ohio  St.,  399;  ception,  but  the  rule  now  seems 
Chace  v.  Chapin,  130  Mass.,  128.  to  be  settled  that  near  relation- 
The  exceptions  to  this  general  doc-  ship  is  no  exception  to  the  rule  ap- 
trine  have  principally  been  in  plied  in  some  jurisdictions,  name- 
cases  where  a  legal  trust  in  favor  ly; — that  a  third  person  cannot 
of  the  third  party  has  been  sue  upon  a  contract  made  for  his 
created,  or  where  an  equitable  benefit  and  to  which  he  is  not  a 
trust  relation  arises,  as  in  the  il-  party. 

lustration   given,   and   in   the   case  "  Dumford    v.    Nessiter,    5    Maule    & 

of  one  paying  money  to  a  party  for  S.,    446;    Walker  v.    Cronin,    107 

the  use  of  a  third  person.     Rela-  Mass.,   555. 
tionship,  also,  was  formerly  an  ex- 


DEPARTMENT  OF  LAW  99 

ties  are  imposed  upon  one,  arises  from  one's  relations  to 
the  contract.  This  contractual  relation  is  commonly  term- 
ed the  privity  of  contract.  \  Without  this  privity — this  re- 
lation to  the  contract— no  right  of  action  accrues  to  anyone 
upon  a  breach  of  the  contract  by  one  or  the  other  of  the 
parties  thereto.  To  illustrate:  A  water  company  con- 
tracted with  a  city  for  the  extinguishment  of  fires  and  failed 
to  keep  its  contract.  The  house  of  A  was  burned  for  want 
of  a  sufficient  supply  of  water  to  put  out  the  fire.  He 
brought  suit  against  the  company  for  damages  to  cover  his 
loss,  basing  his  right  of  action  upon  its  contract  with  the 
city,  and  setting  forth  its  failure  to  furnish  sufficient  water 
to  extinguish  the  fire  which  consumed  his  property,  as  the 
cause  of  his  loss.  It  was  held  by  the  court  that  there  was  no 
privity  of  contract  between  him  and  the  company  and,  that 
therefore,  an  action  by  him  for  breach  thereof,  could  not  be 
sustained.  ^ 

/Again,  a  vendor  of  goods  assumes  no  responsibility  and 
is  not  liable  to  remote  purchasers — purchasers  from  his  ven- 
dee— ^for  misrepresentation,  or  breach  of  warranty,  made  in 
his  contract  with  his  vendee,  and  this,  for  lack  of  privity  be- 
tween him  and  the  subsequent  vendee  or  vendees. 
j^  §72.  Same — Modern  Changes  in  Common  Law  Rule. — 
^The  doctrine  of  the  common  law  that  a  third  person,  not  a 
party  to  a  contract,  cannot  sue  thereon,  has  been  changed 
in  effect  in  the  greater  number  of  the  states15ystatute.^  In 
these  states,  under  the  theory  that  the  third  person  is  "the 
real  party  in  interest, ' '  an  action  by  such  party  may  be  sus- 
tained. This  is  especially  true  under  the  code  method  of 
procedure  which  provides  that  either  the  party  in  whose 
name  the  contract  was  made,  or  the  third  party,  for  whose 
benefit  it  was  made,  may  sue.  In  all  cases,  however,  the  in- 
tention that  the  third  party  should  benefit  by  the  promise 
contained  in  the  contract,  must  be  clearly  expressed, ;  In 
Vrooman  v.  Turner, "  the  defendant  purchased  property 
subject  to  a  mortgage,  and  the  deed  contained  this  recital: — 
"which  mortgage  the  party  hereto  of  the  second  part  here- 
by convenants  and  agrees  to  pay  off  and  discharge,  the  same 

'  Fowler     v.      Athens      City     Water  trary. 

Works  Co.,   83  Ga.,  219.    But  the  <  Davidson  v.  Nichols,  11  Allen,  514. 

courts  of  Kentucky,   Missouri  and  '69  N.  \.,  280. 
North  Carolina  hold  to    the    con- 


100       AMERICAN  EXTENSION  UNIVERSITY 

forming  part  of  the  consideration  thereof. ' '  On  foreclosure 
sale  the  amount  received  failed  to  pay  the  entire  amount  of 
the  mortgage  and  the  plaintiff  sought  to  recover  the  defi- 
ciency in  a  personal  action  against  the  defendant.  The 
court  said  in  effect  that  there  was  no  intention  to  secure  any 
benefit  to  the  mortgagee  by  the  provisions  of  said  deed,  and 
no  privity  of  contract  between  the  plaintiff  and  defendant, 
therefore  no  duty  arose  on  the  part  of  the  defendant  in  be- 
half of  the  plaintiff,  and  accordingly  the  plaintiff  lost  his 
suit.  / 

^§73.  Acquirement  of  Contract  Rights  by  Third  Par- 
ties.— (a)  ByJ^^oyation.^Novation  is  the  substitution  of 
one  party  in  place  of  another  party,  whereby  the  former  be- 
comes subject  to  the  same  rights  as  the  original  party  whose 
contractual  relation  he  assumes.  \  This  form  of  substitution 
can  be  effected  by  the  executioh  of  a  new  contract.  One 
class  of  novation  is  where  a  creditor,  his  debtor,  and  a  th^rd 
person,  enter  into  an  agreement  whereby  the  third  party 
agrees  to  pay  the  debtor's  obligation  to  the  creditor,  and  the 
creditor  thereupon  releases  the  debtor.  '  In  such  a  case  the 
creditor  can  enforce  the  agreement  against  the  third  party 
by  legal  action,  if  necessary.  ^  Novation — the  making  of  a 
new  contract — was  the  only  form  of  contract  assignment 
known  to  the  common  law.  / 

(b)  By  Subrogation.-^Subrogation  is  the  substitu- 
tion of  one  person  for  another  under  a  contract  whereby  the 
person  substituted  acquires  the  rights  or  liabilities  of  the 
other  in  the  particular  contract. }  It  differs  from  novation 
in  that  it  does  not  arise  out  of  an  express  contract  but  is  a 
creation  of  equity,  and  is  not  dependent  on  the  execution  of 
a  new  contract.  *  The  only  right  acquired  by  the  person  sub- 
rogated is  a  right  of  action  against  the  party  at  fault  for  the 
loss  occasioned  by  indemnifying  the  third  party,  or  original 
promisee.  ,•  In  other  words,  the  obligation  of  the  debtor,  or 
promisor,  is  not  extinguished  by  subrogation.  ^  He  is  still 
a  party  to  the  contract  so  far  as  his  liability  ife  concerned; 

•  This   right   is   no   exception   to   the  new,    distinct    contract    is    made, 

rule    previously    discussed    forbid-  where  the  new  party  is  obligated, 

ding  enforcement  of  contracts  by,  and  it  is  this  new  obligation  that 

or    against,    persons    not    parties  gives  the  legal  right  of  action, 
thereto;   for  as  we  have  stated,  a 


DEPARTMENT  OF  LAW  101 

while  in  novation  his  liability  ceases  to  exist.  '^  The  person 
subrogated  is  merely  a  surety,  insurer,  or  guarantor,  and  is 
not  subrogated  until  after  a  breach  by  the  party  insured  or 
guaranteed  and  the  indemnity  has  been  paid  by  the  guaran- 
tor to  the  promisee.  Strictly  speaking,  it  is  incorrect  to  say 
that  a  person  acquiring  a  right  under  a  contract  by  subroga- 
tion is  not  a  party  to  it.  His  rights  are  the  rights  of  a  party 
to  the  contract,  but  they  are  merely  uncertain  and  contin- 
gent upon  the  default  of  the  principal  party.  After  such 
default,  and  the  making  good  under  the  contract,  by  the 
surety,  insurer  or  guarantor,  he  is,  by  his  fulfillment  of  his 
guaranty,  subrogated  to  all  the  contractual  rights  which  his 
principal  had  in  and  under  the  contract. 

(c)  By  Assignment  of  Contract.^As  a  general  rule 
contracts,  public  or  private,  and  before  or  after  breach 
thereof,  may,  in  the  absence  of  a  provision  therein  to  the 
contrary,  or  of  a  statute  forbidding  it,  be  assigned  to  an- 
other. 1 

This  applies  to  all  legal  contracts  of  whatsoever  nature 
excepting  those  cases  where  an  assignment  would  be  con- 
trary to  public  policy  or  public  morals;  those  for  personal 
services,  or  which  require  personal  confidences;  and  those 
in  which  the  rights  are  coupled  with  personal  liabilities.) 
The  parties  to  all  other  contracts  are  presumed  to  have  in- 
tended to  bind  their  assignee  and  legal  representatives  ^  as 
well  as  themselves;  and  it  is  usual,  where  this  is  intended, 
to  incorporate  a  clause  to  that  effect.  For  this  reason  a 
party  to  a  contract  has  the  same  right  to  enforce  it  against 
such  third  person  as  he  has  to  enforce  it  against  the  original 
party  or  parties  to  it. 

.  Contracts  involving  the  relation  of  personal  confidence 
can  not  be  assigned.  In  such  contracts  the  chief  considera- 
tion is  that  the  terms  are  to  be  performed,  or  the  rights  ex- 
ercised by  the  person  contemplated  in  the  contract  and  none 
other.) ,  Such  contracts  are  those  for  attorney,  or  medical 
services,  exclusive  agency,  partnership,  the  painting  of  a 
picture,  the  working  of  land  on  shares,  and  the  like. ' 

*  American  Lumber  Co.  v.  Mulcrane,  Woods  v.  Ridley,  27  Miss.,  119. 
55  Mich.,  622;  Parsons  v.  Till-  As  to  assignability  of  public  con- 
man,  93  Ind.,  29  8;  Lynch  v.  Aus-  tracts,  see  Anderson  v.  De  Vrioste, 
tin,    51    Wis.,    287.  96  Cal.,  404;  Louis  v.  Clemens,  42 

»Petrie  v.  Voorhees,  8  N.  J.  Eq.,  3;  Mo.,  69. 


102       AMERICAN  EXTENSION  UNIVERSITY 

The  criterion  governing  all  such  cases  may  be  said  to  be 
whether  the  contract  is  binding  upon  the  executors  or  ad- 
ministrators of  the  parties  thereto,  or  either  of  them.  If  so, 
as  to  those  parties  whose  administrative  survivors  would  be 
bound,  the  contract  is  assignable.  ® 

§74.  Unassignable  Contracts. — Contractual  liabilities 
cannot  be  assigned.  More  clearly  stated,  the  rule  may  be 
said  to  be  that  one  cannot,  by  assignment,  pass  or  transfer 
to  another  his  liabilities  under  a  contract,  and  thereby  obli- 
gate the  other  party  to  the  contract  to  accept  the  assignee 
in  his  stead.  Everyone  has  the  right  to  select  and  deter- 
mine with  whom  he  will  contract,  and  he  cannot  have  an- 
other person  thrust  upon  him  without  his  consent.  ^*^  Pol- 
lock, in  his  work  on  Contracts  (4th  ed.)  p.  425,  has  well 
stated  this  rule  thus:  ,  "Rights  arising  out  of  contract  can- 
not be  transferred  if  they  are  coupled  with  liabilities,  or  if 
they  involve  a  relation  of  personal  confidence  such  that  the 
party  whose  agreement  conferred  those  rights,  must  have 
intended  them  to  be  exercised  only  by  him  in  whom  he  actu- 
ally confided."  ^^ 

§75.  Assignability  of  Right  of  Action  in  Contract. — A 
chose  in  action,  i.  e.,  the  right  to  bring  an  action,  under  a 
contract,  does  not  accrue  until  there  has  been  a  breach  or 
failure  to  perform  the  contract.  The  right  thus  arising,  al- 
though inseparable  from  the  contract,  may  be  assigned.^) 


"Devlin  v.  Mayor,  63  N.  Y.,  16; 
Groot  V.  storey,  41  Vt.,  533;  Tay- 
lor  V.    Palmer,   31    Cal.,   240. 

'"King  V.  Batterson,  13  R.  I.,  117; 
Lansden  v.  McCarthy,  45  Mo.,  106; 
Boston  Ice  Co.  v.  Patten,  123 
Mass.,   28. 

"  The  rule  that  liabilities  cannot  be 
assigned  is  exemplified  by  the  case 
of  Arkansas  Smelting  Co.  v.  Bel- 
den  Co.,  127  U.  S.,  379.  In  that 
case,  the  defendant  contracted  with 
a  certain  firm  which  operated  a 
smelting  works  and  all  contracts 
were  assigned  to  one  Billing.  The 
defendant  continued  to  ship  ore 
under  the  original  contract.  Later, 
Billing  conveyed  the  smelter  to 
the  plaintiff  corporation,  and  also 
assigned  to  plaintiff  the  contract 
with  the  defendant.  Then  the  de- 
fendant  gave   notice   that   it   con- 


sidered the  contract  cancelled,  and 
refused  to  ship  the  remainder  of 
the  ore  under  the  contract.  In 
an  action  for  damages  for  breach 
of  contract,  the  court  handed 
down  its  decision  to  the  effect  that 
the  defendant  had  depended  upon 
the  credit  and  solvency  of  the  par- 
ticular party  with  which  it  had 
first  contracted,  and  that  it  could 
not  be  compelled  to  accept  the  lia- 
bility of  any  other  person  or  cor- 
poration as  a  substitute  for  the  lia- 
bility of  those  with  whom  it  had 
contracted.  The  defendant  con- 
sented to  the  first  assignment,  al- 
though not  in  duty  bound  to  do 
so,  but  had  a  perfect  right  to  de- 
cline to  assent  to  the  substitution 
of  plaintiff's  liability  for  that  of 
Billing. 


DEPARTMENT  OF  LAW  103 

The  general  rule,  both  at  law  and  in  equity,  is,  that  a  person 
can  assign  no  greater  interest  than  he,  himself,  has.  If 
there  is  any  set-off  or  counterclaim  against  him,  his  assignee 
takes  the  assignment  subject  to  the  defenses.  For  exam- 
ple, if  one  party  is  induced  by  fraud  to  enter  into  a  contract, 
and  the  fraudulent  party  assigns  his  interest  to  another,  the 
defrauded  party  may  have  the  contract  set  aside  in  equity, 
even  though  the  assignee  was  innocent  of  any  fraud,  and 
gave  value  for  the  contract. 

§76.  Notice  of  Assignment. — Notice  of  the  assignment 
of  a  contract,  or  of  the  contractual  right,  should,  as  a  gener- 
al rule,  be  given  to  the  non-assigning  party  to  the  contract, 
in  order  to  surely  render  him  legally  liable,  under  the  con- 
tract, to  the  assignee.  The  rule  stated  is  that  of  the  United 
States  supreme  court  and  that  of  most  of  the  individual 
states.  .  Even  those  courts  which  hold  that  such  notice  is 
not  strictly  necessary,  always  give  preference,  in  cases  of 
conflicting  assignment  interests,  to  those  parties  who  ixi  fact 
do  give  notice  of  the  assignment  to  the  non-assigning  party; 
— and  to  the  assignee  first  giving  such  notice,  where  there 
are  subsequent  assignments.  ^^ 

§77.    Assignment    of   Negotiable   Instruments. — The 

transfer  of  negotiable  instruments  before  their  maturity, 
owing  to  their  peculiar  commercial  characteristics,  is  gov- 
erned by  a  different  class  of  rules  than  the  transfer  or  as- 
signment of  other  contracts.  These  special  rules  will  be 
stated  in  the  lessons  on  Negotiable  Instruments.  For 
the  present  it  is  sufficient  to  say  that  their  transfer  before 
maturity  requires  no  privity  of  contract  between  the  par- 
ties; that  the  instrument  passes  by  mere  indorsement  free 
from  any  defenses  in  the  hands  of  the  bona  fide  holder;  and 
that  no  notice  of  the  transfer  is  necessary. )  When,  however, 
the  instrument  has  matured,  it  cannot  then  be  transferred 
by  simple  indorsement  and  pass  clear  title  thereto  free  from 
equities  against  it.  Indeed  commercial  paper  upon  its  ma- 
turity— i.  e.  upon  its  becoming  due — loses  its  negotiability 
and  becomes  simply  an  item  of  personal  property.)  There- 
after the  proper  mode — as  well  as  the  legal  effect — of  its 
transfer,  is_byiana^signment  in  the  same  manner  as  the  as- 

"Heemans   v.    Ellsworth,    64    N.    Y.,  169. 


104       AMERICAN  EXTENSION  UNIVERSITY 

signment  of  any  other  form  of  contract.  Under  such  cir- 
cumstances, it  is  governed  by  the  same  rules  of  law  as  other 
contractual  instruments. 

§78.  Assignment  By  Operation  of  Law. — Certain  con- 
tractual obligations  and  rights,  and  certain  property  inter- 
ests, pass,  under  certain  conditions,  as  a  matter  of  law — are 
transferred,  that  is  to  say,  without  any  contractual  or  other 
act  upon  the  part  of  th6  parties  in  interest,  and  solely  by  the 
operation  of  the  law  upon  the  changed  relations  to  the  mat- 
ter in  hand.  For  instance,  a  covenant  running  with  land 
transferred, — such  as  an  agreement  to  repair,  or  a  party 
wall  agreement — is  in  effect  assigned  to  the  transferee 
merely  by  the  conveyance  of  the  property  to  him.  At  com- 
mon law,  marriage  transferred  to  the  husband  the  personal 
property  of  the  wife,  and  likewise  her  liabilities,  whether 
under  contract  or  otherwise.;  Representatives  of  deceased 
persons  acquire  all  contractual  rights  to  personal  property, 
and  all  liabilities  chargeable  upon  it;, and  the  heirs  or  de- 
visees acquire  such  rights,  and  are  subject  to  the  liabilities 
affecting  the  real  property  of  the  deceased,  by  the  law's  op- 
^ation  and  without  any  act  on  the  part  of  those  in  interest. 
(Contracts  for  personal  services,  or  for  personal  skill  of  the 
deceased,  do  not  survive;  nor  do  contracts  which  involve 
purely  personal  relations,  such  as  a  promise  to  marry.  . 


CHAPTER  X. 

IXTERPRETATION  OP  CONTRAOTS. 

§79  Definition  and  Purpose. 

80.  Entire  Contract  Must  be  Regarded. 

81.  Grammatical   Errors — Ambiguities. 

82.  Implied  Obligations. 

83.  "Time,"  in  Contracts. 

84.  "Penalty,"  and  "Damages,"  in  Contracts. 

85.  "Joint,"    and    "Several,"    Contracts. 

§79.  Definition  and  Purpose. — The  words  "interpre- 
tation" and  "construction"  as  applied  to  the  question  of  the 
meaning  of  a  contract,  signify  the  ascertainment,  from  the 
instrument  itself,  of  the  actual  intention  and  purpose  of 
the  parties  thereto  as  it  is  expressed  therein.  The  purpose 
of  interpreting  and  construing  contracts,  as  the  given  defini- 
tion of  the  words  show,  is  to  get  therefrom  the  real  intention 


L 


DEPARTMENT  OF  LAW  105 

of  the  parties  thereto,  so  as  to  carry  it  out  fully  and  accu- 
rately.; Courts  enforce  contracts;  they  do  not  make  them 
for  the  contracting  parties.  Accordingly  they  seek  the 
meamng  of  the  contract  from  its  own  context  only,  and  do 
not  inject  therein  anything  not  clearly  expressed  thereby.  ^ 
The  construction  of  contracts  is  a  question  of  law  for  the 
courts,  and  not  for  the  jury,  to  decide. 

§80.  Entire  Contract  Must  Be  Regarded. — The  first 
great  rule  in  the  interpretation  of  contracts  is  that  a  con^ 
tract  in  its  entirety — the  whole  contract — must  be  consider- 
ed, and  the  intention  of  the  parties  thereto  must  be  gathered 
from^ll — and  not  from  any  portion  merely — of  the  lan- 
guage they  have  used  in  the  contract.  ^ 

The  words  of  a  contract  are  to  be  understood  in  their 
plain  meaning,  subject,  however,  to  the  inference  of  inten- 
tion as  shown  by  the  whole  document.  The  most  common 
usage  of  words  may  be  varied  by  their  usage  in  a  particu- 
lar locality;  and,  again,  the  whole  instrument  may  show  an 
intention  to  give  a  narrower  or  broader  meaning  to  words 
than  is  commonly  given  in  a  strict  interpretation.  In  every 
case  the  court  is  governed  by  the  intention  of  the  parties  as 
shown  by  the  whole  document.  Words  with  a  general 
meaning  will  be  restricted  to  the  subject-matter  to  which 
they  apply,  and  will  be  construed  most  strongly  against  the 
party  using  them. 

Formerly  the  courts  of  common  law  held  more  to  the 
principles  of  a  strict  interpretation  of  contracts  rather  than 
to  allowing  the  intention,  derived  from  the  whole  contents 
of  an  agreement,  to  govern  them;  but  this  has  long  been 
done  away  with.  A  statement  in  the  decision  of  the  United 
States  supreme  court  in  Herryford  v.  Davis,  cited  above 
emphasizes  this  point  of  arriving  at  the  intention  of  the  par- 
ties, thus:  V  "What,  then,  is  the  true  construction  of  the  con- 
tract ?  The  answer  to  this  question  is  not  to  be  found  in  any 
name  which  the  parties  may  have  given  to  the  instrument, 
and  not  alone  in  any  particular  provision  it  contains,  discon- 
nected from  all  the  others,  but  in  the  ruling  intention  of  the 
parties,  gathered  from  all  the  language  they  have  used.    It 

*  Brown  v.    Slater,     16    Conn.,    192;  see,  too,  Mason    v.    Alabama    Iron 

Steele  v.  Branch,  40  Cal.,  3.  Wks.,     73     Ala.,     270;     Alton     v. 

^Herryford  v.  Davis,  102  U.  S.,  235;  Transp.  Co.,  12  111..  38. 


106        AMERICAN  EXTENSION  UNIVERSITY 

is  the  legal  effect  of  the  whole  which  is  to  be  sought  for." 

§80.  Grammatical  Errors  —  Ambiguities.  —  Obvious 
mistakes  in  writing  and  grammar  seldom  have  any  effect 
upon  the  interpretation  of  contracts.  The  most  usual  error, 
causing  a  different  meaning  to  be  given  to  a  contract  than 
was  intended,  is  incorrect  punctuation;  but  courts  will  not 
allow  this  form  of  error  to  control  the  intention  as  expressed 
in  the  whole  docimaent.  V 

Where  a  particular  word,  or  the  contract  as  a  whole,  is 
susceptible  of  two  meanings,  one  of  which  will  render  the 
contract  valid,  and  the  other  of  which  will  render  the  con- 
tract invalid,  the  former  will  be  adopted,  so  as  to  uphold  the 
contract.  ^ }  So,  where  one  construction  will  render  the  con- 
tract luilawf  ul  as  being  contrary  to  law  or  public  policy,  and 
the  other  will  render  it  lawful,  the  latter  will  be  adopted;  as 
it  is  presumed  that  the  intention  was  to  execute  a  contract 
valid  in  law.  ^  The  same  rule  applies  to  the  interpretation 
of  certain  words  so  as  to  give  them  a  reasonable  rather  thatn 
an  unreasonable  meaning.  The  fact  that  the  parties,  them- 
selves, placed  an  erroneous  construction  on  the  terms  of  a 
contract,  will  not  prevent  the  court  from  giving  it  the  true 
construction.  ^  but  where  the  meaning  is  doubtful,  such  con- 
struction by  the  parties  is  of  great  weight  in  determining 
the  actual  meaning,  and  in  some  cases  it  may  be  controll- 
ing. ^  Even  in  cases  where  one  party  has  acted  upon  the 
interpretation  most  favorable  to  his  rights,  that  interpreta- 
tion will  prevail,  providing  it  is  not  a  too  strained  construc- 
tion. "^  So,  too,  parties  will  be  bound  by  what  their  contract, 
by  its  words,  expresses,  whether  they  actually  intended  it,  as 
they  in  fact  expressed  it,  or  not.  ^ ' 

§82.  Implied  Obligations. — Certain  obligations  are  ne- 
cessarily implied  in  a  contract,  and  when  these  implications 
are  necessary,  or  are  necessarily  drawn  from  the  instru- 
ment itself,  it  will  be  presumed  that  such  was  the  inten- 

» Pitney  v.  Bolton,  45  N.  J.  Eq.,  639;  sell  v.  Young,  94  Fed.,  45. 

Coyne  v.  Weaver,  84    N,    Y.,    386;  « Hosmer  v.  McDonald,   80  Wis.,   54; 

Phillips    V.    McFarlane,    3     Minn.,  District  of    Columbia    v.    Gallaher, 

109.  124  U.  S.,  505. 

*Alfree    v.     Gates,     82     Iowa,     119;  *  London  &  S.  F.  Bank  v.  Parrott,  125 

United  States  v.    Central    Pac.    Ry.  Cal.,  472. 

Co.,  118  U.  S.,  235.  « Cramp  Ship  Bldg.   Co.  v.   Sloan,   21 

"Hershey  v.  Luce,  56  Ark.,  320;  Rus-  Fed.  Rep.,  561. 


DEPARTMENT  OF  LAW  107 

tion  of  the  parties.  Whether  or  not  they  knew  the  con- 
sequences of  the  terms,  as  expressed  by  them  does  not  mat- 
ter. The  rule  will  hold,  unless  they  actually  exclude  the  ne- 
cessary implication  from  the  operation  of  the  contract  by 
express  provisions  therein.  This  principle  is  illustrated  by 
an  ordinary  contract  of  sale.  In  this  class  of  contracts,  in 
the  absence  of  some  express  provision  to  the  contrary,  it  is 
conclusively  presumed  that  the  seller  intended  to  stipulate 
that  he  had  title  to  the  property  and  the  right  to  sell  it. 
This  implication  of  law  is  called  ''implied  warranty." 

§83.  ''Time"  in  Contracts. — Time  is  said  to  be  of  the 
essence  of  a  contract  when,  by  the  express  terms  of  the  con- 
tract, it  is  clear  that  the  thing  to  be  done  was  to  be  accom- 
plished at  a  stated  time. )  The  common  law  rule,  that  time  is 
of  the  essence  of  a  contract,  is  not  generally  taken  into  con- 
sideration unless  the  parties  expressed  such  an  intention  in 
the  contract.  In  the  absence  of  such  an  expression,  the  rule 
is  that  a  reasonable  time  was  meant.  In  some  cases,  accord- 
ing to  the  nature  of  the  contract,  it  will  be  implied  that  time 
is  of  the  essence,  as  in  contracts  for  the  manufacture  and  the 
sale  of  goods.  In  contracts,  such  as  those  for  the  sale  of 
land,  time  is  not  of  the  essence  of  the  contract.  In  other 
words,  if  one  of  the  parties,  in  such  cases,  does  not  do  a  cer- 
tain stated  thing  by  a  certain  day,  the  other  party  is  not  dis- 
charged from  the  contract  because  of  the  former's  tardiness. 

§84.    ^'Penalty"  and  '^Damages"  in  Contracts.— If  the 

parties  to  a  contract  name  therein  a  certain  sum  to  be  paid 
by  one  to  the  other,  on  breach  of  the  contract,  such  sum  may 
be  recovered  if  it  was  intended  to  represent  the  damages 
sustained  by  non-performance  of  the  contract. ;  If,  however, 
it  was  intended  merely  as  a  penalty  for  non-fulfillment,  re- 
gardless of  the  actual  loss  sustained,  the  courts  will  limit  the 
amount  recovered  to  the  amount  of  the  actual  loss  shown^ 
In  determining  whether  the  sum  named  in  the  contract  is  a 
penalty,  or  is  liquidated — i.  e.  ascertained — damages,  the 
following  tests  may  be  applied:  (1)  Is  the  sum  named, 
greater  than  the  value  of  the  subject  matter  as  expressed  in 
the  contract  ?  (2)  If  the  value  is  not  expressed,  is  the  sum 
in  excess  of  the  probable  damage  ?  (3)  If  the  debt  is  pay- 
able in  installments,  is  the  sum  fixed  in  the  contract  greater 
than  the  total  of  all  the  installments'?    According  to  the 


108       AMERICAN  EXTENSION  UNIVERSITY 

findings,  as  determined  by  these  questions,  the  character — ■ 
and  hence  the  measure — of  the  recovery  imder  such  a  provi- 
sion is  determined.  The  courts  will  not  be  controlled  by  the 
term  used  by  the  parties  in  the  contract.  Whether  they 
used  the  word  ''damages"  or  "penalty,"  the  sum  recover- 
able thereunder  will  depend  upon  the  interpretation  of  their 
real  instruction,  as  shown  by  the  document  itself.  Recov- 
ery is  had  in  an  action  for  breach  of  contract.  A  full  treat- 
ment of  the  different  aspects  of  damages  will  be  given  under 
the  subject  of  Damages. 

The  following  rules  are  useful  in  determining  whether 
the  sum  fixed  by  parties  is  liquidated  damages,  or  is  merely 
a  penalty.  (1)  If  the  value  of  the  subject  matter  of  the 
contract  is  certain  or  is  easily  ascertained,  the  sum  in  excess 
of  that  value  is  a  penalty,  and  no  greater  amount  can  be  re- 
covered. (2)  If,  however,  the  value  of  the  subject  matter 
is  uncertain,  and  the  sum  fixed  is  not,  on  the  face  of  the  con- 
tracts, greatly  in  excess  of  the  probable  damages,  the  sum 
is  recoverable  as  liquidated  damages.  (3)  r'lf  the  obliga- 
tion is  to  be  paid  in  installments,  it  is  not  imposing  a  penalty 
to  provide  that  on  default  in  any  one  payment  the  entire  bal- 
ance of  unpaid  payments  shall  at  once  fall  due.  J 

§85.  ''Joint"  and  * 'Several"  Contracts. — A  contract 
in  which  two  or  more  persons  join  in  the  promise  or  obliga- 
tion, is  a  "joint"  contract,  and  enforceable  against  all  of 
them.  ^  A  contract  in  which  two  or  more  persons  promise 
individually  and  singly  is  a  "several"  contract  and  enforce- 
able only  against  each  one  individually.  This  principle  will 
yield,  however,  under  an  expression  in  the  contract  directly 
to  the  contrary. 

A  "joint"  promise  is  collective ;  a  "several"  promise  is 
singular.  Jn  the  first  class  of  cases  the  promisee  must  unite 
all  the  promisors  in  his  suit ;  in  the  second  class  he  can  sue 
any  one  or  more  of  them  seperately  for  the  full  amount.  A 
"joint  and  several"  promise  is  one  where  the  parties  under- 
take both  collectively  and  seperately  to  do  the  thing  prom- 
ised. Under  such  a  contract  the  promisee  may  sue  either 
promisor  singly,  or  he  may  sue  all,  or  any  number  less  than 
all,  at  any  one  time.  ^" 

"Bower    v.    Swodlen,    1    Atk.,    294;      "  Bangor  Bank  v.  Treat,  6  Greenleaf, 
Cutts  V.  Gordon,  13  Me.,  474.  207. 


DEPARTMENT  OF  LAW  109 

'  In  the  case  of  subscriptions  by  a  number  of  persons  to 
promote  some  common  enterprise,  the  promises,  though 
joint  in  form,  are  held  to  be  several.  Each  subscriber  is 
held  to  promise  seperately  and  severally,  and  an  action 
against  all  the  subscribers  jointly  will  not  lie.  ^^  Joint  and 
several  engagements  are  almost  entirely  controlled  by 
st?,tute  at  the  present  time,  hence,  in  practice,  the  student 

must  consult  the  affairs  of  his  own  state. 

J 

"  Dean  v.  Wilson,  10  Wall.,  158. 


QUIZZEE. 

OPERATION  OF  CONTRACTS. 

l-§70.     Can  one  not  direct  party  to  a  contract  enforce  its 
provisions  %    If  so,  when  % 

2-  In  what  cases  have  exceptions  been  made,  prin- 

cipally? 

3-  Does  the  fact  of  personal  relationship  afford  a  basis 

for  such  exceptions  % 

4-  Can  one  have  a  legal  liability  imposed  upon  him  by 

a  contract  wherein  he  does  not  participate  % 
5-§71.    From  what  does  contractual  obligation  arise  *? 

6-  What  is  the  contractual  relation  commonly  called? 

7-  What  legal  right  accrues  from  this  relation? 

8-  State  a  case  where  a  right  of  action  was  derived  for 

lack  of  privity  of  contract. 
9-§72.    Has  the  common  law  rule  as  to  the  right  to  sue 
without  privity  of  contract  been  changed?    If 
so,  how  and  where  ? 

10-  Upon  what  theory  is  this  based? 

11-  Under  what  system  of  procedure  is  this  particular- 

ly permitted? 

12-  What  is  always  essential  as  the  basis  of  such  right  ? 

13-  Give  illustrative  case  which  was  lost  for  lack  of 

privity  of  contract. 
14- §73.    Define  novation. 
15- (a)      How,  only,  can  novation  be  effected? 

16-  Give  an  illustration  of  a  novation. 

17-  What  was  the  only  common  law  form  of  contract 

assignment  ? 


110       AMERICAN  EXTENSION  UNIVERSITY 

18-  Is  novation  an  exception  to  the  rule  forbidding  con- 

tract enforcement  by  non-contracting  party — 
Why? 

19- (b)      Define  subrogation. 

20-  How  does  it  differ  from  novation  ? 

21-  What  is  the  only  right  acquired  by  the  person  sub- 

rogated? 

22-  Does  subrogation  extinguish  the  obligation  of  the 

original  promisor? 

23-  In  this  respect  does  subrogation  differ  from  no- 

vation— ^if  so,  how? 

24-  What  is  the  real  contractual  relation  of  a  subra- 

gator? 

25-  What  are  a  subragator's  rights,  and  upon  what  are 

they  contingent? 

26-  What  is  the  legal  position  of  a  subrogator  after  the 

default  of  the  original  promisor? 
27- (c)      State  the  general  rule  governing  the  assignment,of 
contracts. 

28-  To  what  contracts  does  the  rule  apply? 

29-  What  presumption  attaches  to  all  contracts? 

30-  What  right,  and  in  whose  favor,  is  based  upon  this 

presumption? 

31-  What  contracts  cannot  be  assigned — and  why? 

32-  What  criterion  governs  all  cases,  as  to  their  assign- 

ability? 
33-§74.    Are  contractual  liabilities  assignable — and  why? 

34-  Give  Pollock's  statement  of  the  rule. 

35-  State  a  case  where  an  assigned  contract-liability 

was  not  enforced. 
36-§75.    What  is  a  "chose  in  action?"  . 

37-  Are  such  rights  assignable — if  so,  when?    '  N^ 

38-  What  contract-interest  can  one  assign? 

39-  Are  assigned  contract  rights  subject  to  any  defen- 

ses that  were  good  between  the  original  parties? 
If  so,  name  some  defenses. 
40-§76.    Is  it  necessary  to  give  notice  to  any  one,  of  the  as- 
signment of  a  contract? 

41-  If  so,  to  whom  and  for  what  reason? 

42-  Between  what  parties  is  such  notice  unnecessary? 

43-  Is  the  rule  requiring  notice  universal  ? 


DEPARTMENT  OF  LAW  111 

44-  If  not,  what  advantage  follows  giving  it  where  it  is 

not  required? 
45-§77.    Are  the  rules  governing  the  assignment  of  general 

contracts,  applicable  to  negotiable  instruments  ? 

46-  What  can  you  say  as  to  lack  of  privity  of  contract 

in  such  instruments;  how  they  pass  to  others; 
and  necessity  of  notice  of  transfer? 

47-  What  is  the  rule  as  to  transfer  of  such  instruments 

after  their  maturity? 

48-  What  effect  does  maturity  of  commercial  paper 

produce  as  to  its  legal  character? 

49-  How  can  matured   commercial   paper   be   trans- 

ferred, and  by  what  rules  is  it  then  governed? 

50-§78.    What  can  you  say  as  to  transfer  of  contractual  ob- 
ligations by  operation  of  law? 

51-  State  instances  of  such  transfers. 


INTERPRETATION  OP  CONTRACTS. 

l-§79.    Define  '* interpretation,"  and  "construction,"  as 
they  apply  to  determining  contracts. 

2-  What  is  the  purpose  of  the  interpretation  and  the 

construction  of  contracts  ? 

3-  What  is,  and  what  is  not,  the  province  of  the  court 

as  to  contracts  ? 

4-  Where  do  courts  obtain  the  meaning  of  contracts? 

5-  What  is  the  nature  of  the  question  as  to  the  con-       . 

struction  of  contracts — and  who  decides  it?  ^,*^^Jl/f' 
6- §80.     State  the  first  great  rule  in  the  interpretation  of 
contracts. 

7-  In  interpreting  contracts  how  are  their  words  to  be 

taken  and  understood? 

8-  How  may  the  common  usage  of  words  be  varied 

and  what,  as  to  same,  may  the  contract  show? 

9-  By  what  is  the  court  always  governed? 

10-  How  will  the  words  of  a  contract  be  restricted,  and 

construed? 

11-  What  rule  of  construction  has  become  modified, 

and  with  what  result? 

12-  What  is  the  true  construction  of  a  contract  ? 
13-§81.    What  effect  on  a  contract  have  grammatical  er- 
rors? 


112       AMERICAN  EXTENSION  UNIVERSITY 

14-  Can  improper  punctuation  control  the  interpreta- 

tion of  a  contract  *? 

15-  What  is  the  rule  governing  interpretation  making 

a  contract  valid  or  invalid? 

16-  What  is  the  rule  governing  interpretations  render- 

ing the  contract  unlawful  or  lawful? 

17-  So,  too,  as  to  reasonable  or  unreasonable  meanings 

of  words? 

18-  What  effect  on  a  court's  interpretation  of  a  con- 

tract will  an  erroneous  interpretation  placed 
thereon  by  the  parties  thereto,  have  ? 

19-  What  follows  where  one  party  has  acted  upon  his 

own  interpretation? 

20-  Also,  where  the  contract  words  express  a  meaning 

other  than  that  intended? 
21-§82.    What  will  be  presumed  as  to  obligations  necessar- 
ily implied,  though  not  definitely  expressed,  in 
a  contract  ? 

22-  What  effect  does  an  ignorance  of  the  consequences 

of  terms  used,  have  ? 

23-  How  can  implications  necessarily  arising  from  the 

express  words  of  a  contract,  be  avoided? 

24-  State  an  illustration  of  a  "necessary  implication." 

25-  What  is  an  implied  warranty? 

26-§83.    What  is  meant  by  the  term,  "time  is  of  the  es- 
sence" of  a  contract? 

27-  What  is  the  common  law  rule  as  to  time  being  of 

the  essence? 

28-  How  can  time  be  made  the  essence  of  a  contract? 

29-  Where  it  is  not  so  made  the  essence,  what  rule  gov- 

erns the  interpretation  as  to  time  ? 

30-  Will  time  ever  be  implied  as  being  of  the  essence 

of  contracts? 

31-  Name  some  cases  where  it  will,  and  others  where 

it  will  not,  be  so  implied. 
32- §84.     State  the  rule  as  to  "liquidated  damages,"  and 
"penalties,"  named  in  contracts. 

33-  What  tests  determine  whether  a  sum  fixed  in  a  con- 

tract is  to  be  regarded  as  damages  or  penalty. 

34-  Will  the  court  be  controlled  in  its  interpretation 

by  the  term  used  in  the  contract  ? 


DEPARTMENT  OF  LAW  113 

35-  What    will    determine    the    amount    recoverable 

under  such  a  provision*? 

36-  How  is  recoverey  in  such  cases  obtained? 

37-  Give  some  rules  helpful  in  determining  whether  a 

sum  fixed  in  the  contract  is  to  be  taken  as  dam- 
ages or  as  penalty. 
38-§85.    What  is  a  "joint ' '  contract,  and  against  whom  is  it 
f orceable  ? 

39-  What  is  a  "several"  contract,  and  against  whom 

is  it  enforceable  ? 

40-  What  kind  of  a  promise  is  collective  and  what  is 

singular'? 

41-  Define  a  "  j  oint  and  several ' '  promise. 

42-  Against  whom  is  such  a  contract  enforceable? 

43-  Are  subscription  contracts  joint  or  several? 

44-  How  are  joint  and  several  contracts  now  con- 

trolled? 

>^,A^^  -  ^-'''''  '' 


114       AMERICAN  EXTENSION  UNIVERSITY 

LESSON  8.— 

CHAPTER  XI. 

DISCHARGE    OF    CONTRACTS. 

§86.  In  General. 

87.  By  Fulfillment. 

88.  By  Release,  Recission  and  Waiver. 

89.  By  Substitution  of  New  Terms. 

90.  By  Stipulations  of  Contract. 

91.  By   Impossibility   of   Performance. 

(a)  Impossible  Conditions. 

(b)  By  Act  of  Law. 

(c)  By  Destruction  of  Subject-matter. 

(d)  By  Incapacity  to  Perform. 

92.  By  Accord  and  Satisfaction. 

93.  Same — Subject  Matter  of — . 

94.  By  Operation  of  Law. 

(a)  By  Death. 

(b)  By  Receiving  Better  Security. 

(c)  By    Unauthorized    Alteration. 

(d)  By  Bankruptcy. 

(e)  By  Statute  of  Limitations. 

95.  By  Breach. 

(a)  In  General. 

(b)  By  Renunciation.  < 

(c)  By    Impossibility    or    Failure  to  Perform. 

§86.  In  General. — The  discharge  of  a  contract  is  the 
putting  to  an  end  of  the  contract,-^or,  rather  the  termina- 
tion of  all  legal  liabilities  thereunder.  This  may  be  accom- 
plished in  many  ways,  some  by  the  action  of  the  parties, 
thereto,  themselves ;  others  by  the  operation  of  law.  In  the 
first  instance  a  discharge  is  accomplished,  (a)  by  the  ful- 
fillment of  the  terms  of  the  contract — that  is  to  say,  by  its 
performance;  (b)  by  voluntary  agreement  between  the  par- 
ties;—  that  is,  by  their  rescinding  the  contract,  or  by  the  re- 
lease of  one  or  more  of  the  parties  thereto,  or  by  the  making 
of  a  new  contract  in  place  of  the  original  one;  and  (c)  by  a 
breach  of  the  contract  by  one  of  the  parties,  and  the  like. 
In  the  second  instance  it  is  accomplished  (a)  by  the  death 
of  any  of  the  parties  to  the  contract;  (b)  by  their  bank- 
ruptcy or  insolvency;  (c)  by  a  material  unauthorized  altera- 
tion of  the  instrument — when  the  contract  is  in  writing;  (d) 
by  a  merger  of  the  contract  in  another  one;  (e)  by  judicial 
judgment,  and  (f)  by  limitation  of  a  time  prescribed  by 
statute.  The  consideration  of  the  manner  in  which  con- 
tracting parties  may  be  released  from  their  contractual  ob- 
ligations, involves  the  consideration  also  of  the  liabilities 
and  rights  of  action  arising  upon  the  discharge  of  contracts. 


DEPARTMENT  OF  LAW  115 

As  a  general  rule  no  right  of  action  arises  in  any  case  except 
upon  discharge  by  a  breach  of  contract.  The  breach  may 
be  total,  or  merely  a  f  ailiu'e  to  abide  by  a  certain  term  of  the 
agreement.  In  either  event  the  legal  liability  is  the  same, 
although  the  measure  of  damages  thereon  may  vary.  This 
subject  of  legal  right  of  actions  upon  contracts  will  be  treat- 
ed in  the  succeeding  lesson. 

§87.  By  Fulfillment. — It  needs  no  judicial  authority  to 
establish  the  fact  that  where  the  parties  to  a  contract  carry 
out  its  provisions  in  full,  leaving  nothing  undone,  and  leave 
nothing  to  be  done,  on  either  side,  the  contract,  by  such  ful- 
fillment, is  terminated.  Such  termination  of  a  contract  is 
the  simplest  form  of  the  discharge  of  contractual  obliga- 
tions. 

Where  a  promise  is  given  upon  an  executed  considera- 
tion, the  performance  of  that  promise  discharges  the  con- 
tract; but  where  one  promise  is  given  in  consideration  for 
another,  performance  by  one  party  does  not  necessarily  dis- 
charge the  contract,  although  it  releases  the  performer  from 
liability  for  non-performance.  The  fact  as  to  the  perform- 
ance being  complete  depends  upon  the  construction,  rather 
than  upon  the  operation  of  the  contract. 

§88.  Release,  Recission  and  Waiver. — ^Where  the  par- 
ties to  a  contract,  by  an  express  agreement,  thereafter  agree 
to  release  each  other  from  all  contractual  liability  under  the 
contract,  such  termination  thereof  is  termed  a  recission,  re- 
lease, or  waiver,  and  under  proper  conditions  is  fully  bind- 
ing upon  all  parties  in  interest,  j  Such  an  agreement  can  le- 
gally affect  only  cases  of  executory  contracts,  and  is  not 
valid  or  binding  where  a  right  of  action  has  accrued  in  favor 
of  either  party.  If  it  is  intended  to  release  such  right  of  ac- 
tion, a  special  stipulation  therefor  must  be  incorporated  in 
the  release  or  recission  of  the  contract;  or  it  must  be  given 
in  a  seperate  instrument.  In  short,  to  merely  release  a  con- 
tract does  not,  of  itself,  release  any  accrued  rights  of  action 
thereunder.  ^ 

A  contract  of  release  must  have  a  consideration,  just 
the  same  as  any  other  contract,  in  order  for  it  to  be  binding 
on  the  parties.  Mutual  releases,  where  there  are  still  things 

*  Moore  v.  Detroit  Locomotive  Works,  14  Mich.,  266. 


116       AMERICAN  EXTENSION  UNIVERSITY 

to  be  done  under  the  contract  by  both  parties,  are  sufficient, 
one  release  being  a  consideration  for  the  other.  Where  the 
release  runs  to  only  one  party,  some  additional  considera- 
tion must  be  given,  ^  or  it  must  be  under  seal,  ^  Written 
contracts,  and  those  under  seal,  can  be  released  by  a  parol 
contract.  *  This,  because  the  release  contract  is  a  new 
agreement — as  we  have  stated  is  necessary  for  it  to  be, — 
and  a  parol  contract  is  wholly  valid  always.  A  parol  re- 
lease without  consideration  would  of  course  be  void.  ^ 

The  weight  of  American  authority  is  that  the  surren- 
der of  the  evidence  of  indebtedness,  such  as  voluntarily  re- 
turning a  note  or  mortgage  to  the  maker,  amounts  to  a  re- 
lease of  the  debt,  and  that  such  a  release  is  valid  whether 
the  surrender  was  made  for  or  without  a  consideration. 
However,  the  surrender  must  be  made  with  the  intention 
and  for  the  purpose  of  discharging  the  indebtedness.  ® 

§89.  Substitution  of  New  Terms. — Naturally  a  mater- 
ial change  in  a  contract,  whereby  new  terms  and  conditions 
are  incorporated  therein;  or  whereby  certain  provisions  of 
the  contract  are  erased  or  annulled,  discharges  the  original 
contract. 

In  order  to  work  a  discharge  by  the  substitution  of  new 
terms,  the  same  must  amount  to  a  new  contract  and  the  in- 
tention to  discharge  the  old  one  must  thereby  distinctly  ap- 
pear. This  may  be  done  by  novation,  or  by  substitution  of 
parties,  or  by  the  creation  of  new  terms  entirely  inconsis- 
tent with  those  of  the  old  contract.^  Substitution  differs 
from  waiver  in  that  in  waiver  the  contractual  relation  is  ex- 
tinguished, another  form  of  contract  obliterating  and  super- 
seding the  old  form.  In  the  latter  case,  the  change  of  rights 
and  liabilities,and  the  consequent  extinction  of  those  which 
before  existed,  form  the  consideration  on  each  side  for  the 
new  contract  created  by  such  alteration.  To  illustrate :  In 
contracts  for  the  sale  of  goods  and  their  delivery  at  a  stated 
time,  the  purchaser  often  verbally  requests  a  postponement 
of  delivery.    After  such  has  been  granted,  he  sometimes  re- 

=*  Finch  V.  Simon,  70  N.  Y.  Supp.,  361.  169;   Myers    v.    Byington,    34    la., 

=  Lancaster   v.   Elliott,   50   Mo.    App.,  205. 

245;  Kidder  v.  Kidder,  33  Pa.  St.,  » Vanderbech  v.  Vanderbech,  30  N.  J. 

268.  Eq.,  270;   Albert  v.  Zigler,  29  Pa. 

*  Cummings  v.  Arnold,  3  Met.,  486.  St.,  50. 
'  Seymore    v.    Menham,    17    Johnson, 


DEPARTMENT  OF  LAW  117 

fuses  to  accept  the  goods  at  all,  and  when  sued  alleges  that 
the  contract  was  discharged  by  the  alteration  of  the  time  of 
performance,  and  that  the  new  contract  is  void  because  not 
in  writing  and  so  contrary  to  the  17th  section  of  the  statute 
of  frauds.  The  majority  of  the  English  and  American  cases 
sustain  the  latter  claim,  but  the  first  contention  of  the  pur- 
chaser is  not  upheld,  the  courts  holding  that  a  voluntary  for- 
bearance to  delivery,  done  at  the  request  of  the  other  party, 
differs  from  a  substitution  of  one  agreement  for  another,  in- 
asmuch as  the  postponement  is  not  inconsistent  with  the 
terms  of  the  original  contract,  and  the  purchaser  prolongs 
the  time  of  delivery  at  his  own  request.  This  is  not  the  case 
where  a  contract  is  so  far  altered  as  to  be  inconsistent  with 
the  original  agreement ;  or  where  a  new  party  is  substituted 
by  the  agreement  of  all  concerned;  in  which  instances  the 
original  contract  would  be  thereby  annulled 

§90.  By  Stipulation  of  Contract. — A  contract  may  con- 
tain the  elements  of  its  own  discharge  under  the  following 
circumstances:  (a)  non-fulfillment  of  a  specified  term  of 
the  contract;  (b)  the  occurence  of  a  particular  event;  or  (c) 
the  exercise  of  an  option  to  terminate  upon  notice.  In  case 
of  non-fulfillment  in  the  contemplation  of  the  parties,  as 
evidenced  by  their  contract,  no  liability  arises  for  non-per- 
formance of  a  particular  term  unless  some  loss,  not  contem- 
plated by  the  parties,  accrues  therefrom,  through  the  fault 
of  the  party  failing  to  perform. 

The  occurence  of  a  particular  event  at  a  date  later  than 
that  of  the  contract,  is  termed  a  condition  subsequent. 
Upon  the  happening  of  such  event  as  stated  in  the  contract, 
it  is  thereby  fulfilled.  An  ordinary  bond  fm-nishes  an  ex- 
ample of  such  a  condition  in  a  contract; — that  is,  on  the  ful- 
fillment of  the  condition  of  the  bond  as  therein  stated,  the 
bond  becomes,  ipso-facto,  discharged.  Thus,  also,  a  com- 
mon carrier's  contract  may  terminate  on  the  occurence  of 
events  implied  in  every  contract  such  as  the  happening  of 
"an  act  of  God,"  like  an  earthquake,  avalanche  or  lightning, 
or  inherent  defects  in  the  article  carried,  whereby  they  per- 
ish) ^  The  provision  relating  to  optional  termination  is  in- 
stanced by  contracts  of  rental  from  month  to  month,  and  in 

»Fisk  V.  Chapman,  2  Ga.,  349;  Crosby  v.  Fitch,  12  Conn.,  410. 


118       AMERICAN  EXTENSION  UNIVERSITY 

fact,  any  contract  providing  for  the  release  of  either  party 
from  the  obligations  of  the  contract,  upon  notice  to  the  other 
as  specified  therein. 

§91.  By  Impossibility  of  Performance. — (a)  Impos- 
sible Conditions. — Impossible  conditions  in  a  contract  can- 
not be  performed.  If,  therefore,  a  person  contracts  to  do 
what,  at  the  time,  is  absolutely  impossible,  the  contract  will 
not  bind  him,  but,  generally,  where  the  contract  is  to  do  a 
thing  which  is  possible  in  itself,  the  non-performance  there- 
of is  not  excused  by  the  occurence  of  an  inevitable  accident, 
or  other  contingency.  It  is  immaterial  that  the  contingen- 
cy was  unf  orseen.  Thus,  if  a  man  contracts  to  build  a  house 
and  during  its  construction  it  is  destroyed  by  fire,  the  unf  or- 
seen destruction  does  not  excuse  non-performance.  ®  If  a 
promisor  makes  his  promise  unconditionally,  he  takes  the 
risk  of  being  held  liable  thereon,  even  though  performance 
should  become  impossible  by  circumstances  beyond  his  con- 
trol. He  should  have  provided  against  such  contingencies 
by  proper  provisions  in  his  contract.  There  are  certain  Ex- 
ceptions to  this  rule,  as  will  be  pointed  out  in  the  following 
paragraphs. 

(b)  By  Act  of  Law. — Legal  impossibility  to  fulfill 
a  contract  arising  from  the  operation  of  law,  exonerates  the 
promisor.  The  case  of  Hughes  v.  Wamsutta  Mills,  ^"  is  an 
example  of  this  kind  of  impossibility.  In  that  case  the 
plaintiff  contracted  to  forfeit  the  money  due  him  as  wages, 
if  he  left  defendant's  employ  without  giving  two  weeks  no- 
tice. While  in  such  employment  he  was  arrested  and  con- 
fined in  jail.  After  his  release,  the  employer  refused  to 
pay  him  the  money  due  for  services  up  to  the  time  of  his  ar- 
rest, claiming  forfeiture  thereof  by  reason  of  the  breach  of 
the  agreement  to  give  the  notice  stated.  Suit  was  brought, 
and  the  court  held  that  the  act  of  the  law  in  the  making  of 
the  arrest,  constituted  a  legal  impossibility  of  performance 
of  the  contract,  which  excused  the  plaintiff  from  any  liabil- 
ity for  his  failure  to  give  such  notice,  and  therefore  gave  him 
judgment  against  his  employer. 

(c)  By  Destruction  of  Subject-Matter. — The  destruc- 
tion of  the  subject  matter  of  a  contract,  without  the  fault  of 

*  School    Dist.    No.    1    V.    Danchy,    25      "  H.  Allen  (Mass.),  201. 
Conn.,  530. 


DEPARTMENT  OF  LAW  119 

either  party  thereto,  operates  as  a  discharge  of  the  contract. 
If  the  intention  of  the  parties  as  shown  by  the  contract  was 
based  upon  the  assumption  that  a  certain  thing  should  con- 
tinue in  existence,  then  if,  without  the  fault  of  the  parties, 
the  thing  ceases  to  exist,  the  implied  condition  upon  which 
the  contract  depended  fails  and  the  duty  of  performance  no 
longer  remains.  In  the  case  of  Dexter  v.  Norton  et  al.,  ^^ 
the  defendant  contracted  to  deliver  to  the  plaintiff  607  speci- 
fied bales  of  cotton,  which  were  identified  by  their  marks. 
He  had  delivered  460  bales  when  the  remainder  were  de- 
stroyed by  fire  without  his  fault.  Cotton  rose  in  value  and 
the  plaintiff  claimed  the  increase  in  value  as  damages.  The 
court  held  that  under  the  contract  the  plaintiff  would  not 
have  been  obliged  to  accept  other  bales  than  those  which 
had  been  specified  and  marked,  and  as  thus  identified  were 
sold  to  him,  and  that,  accordingly,  the  defendant  could 
be  legally  held  to  deliver  only  the  said  bales,  delivery  of 
which  was  impossible  by  reason  of  the  fire,  and  hence,  the 
part  of  this  contract  which  was  unexecuted  thus  became  im- 
possible of  performance.  The  existence  of  those  certain 
bales  was  held  to  be  an  implied  condition  upon  which  the 
contract  was  based  and  their  destruction  was  not  the  fault 
of  the  defendant.  He  was,  therefore,  legally  excused  from 
performance. 

(d)  By  Incapacity  to  Perform. — In  contracts  for  per- 
sonal services  there  is  always  the  implied  condition  that  the 
party  to  rend.er  the  services  will  be  physically  able  to  exe- 
cute the  contract  by  so  doing.  If  one  is  incapacitated  from 
rendering  the  service  contracted  for,  by  his  own  illness  or 
by  the  illness  or  death  of  others  upon  whose  personal  ser- 
vices the  contract  was  based,  he  will  be  excused  from  fulfill- 
ment of  the  contract,  by  the  impossibility  of  carrying  it  out, 
owing  to  the  incapacity  stated.  ^^  The  courts  are  usually 
liberal  in  construing  this  rule.  The  case  of  Spaulding  et  al. 
V.  Rosa  et  al.,  ^^  was  decided  upon  this  principle  of  law.  In 
that  case  an  opera  company  was  discharged  from  liability  on 
its  contract  to  give  a  certain  number  of  performances,  on 
account  of  the  sickness  of  its  leading  tenor  and  chief  attrac- 
tion, whose  presence  was  regarded  as  of  the  essence  of  the 

"  47  N.  Y.,  62.  "  71  N.  Y.,  40. 

>^Sween  v.  Gilbert,  21  Wis.,  401. 


120       AMERICAN  EXTENSION  UNIVERSITY 

contract.  In  cases  where  a  contract  for  personal  services 
has  been  performed  in  part,  before  the  incapacity  has  oc- 
curred, the  party  contracting  for  such  services  must  recover 
for  the  portion  rendered,  on  a  quantum  meruit —  that  is, 
upon  the  basis  of  what  the  service  actually  rendered  is 
worth  and  not  on  the  basis  of  the  contract  itself — as  the  con- 
tract, as  stated,  is  discharged  by  the  happening  of  the  inca- 
pacity. 

§92.  By  Accord  and  Satisfaction. — The  legal  notion  of 
accord  is  a  new  agreement  on  a  new  consideration  to  dis- 
charge a  debtor.  It  is  not  enough  that  there  be  a  clear 
agreement,  or  accord,  and  a  sufficient  consideration,  but  the 
accord  must  be  executed.  ^^  Such  an  agreement  carried  out 
is  called  an  Accord  and  Satisfaction.  This  may_be  defined 
as  as  a  settlement  of  a  claim  by  giving  something  different 
than  that  which  was  originally  agreed  upon,  or,  in  the  case 
of  a  disputed  claim,  by  compromising  the  amount.  By  the 
accord  the  parties  agree  upon  a  sum  of  money  or  other  mat- 
ter to  be  given  and  accepted  as  compensation  for  the  breach 
of  a  contract,  instead  of  the  legal  remedy  provided  by  law; 
and  by  the  execution  of  the  accord,  that  is,  by  the  actual  de- 
livery and  acceptance  of  the  matter  agreed  upon,  the  right 
of  action  is  satisfied  and  discharged.  To  operate  as  an  ac- 
cord and  satisfaction  it  is  necessary  that  an  offer  of  money 
be  accompanied  by  such  acts  and  words  as  amount  to  a  stip- 
ulation that  if  the  money  is  accepted  it  is  to  be  in  satisfac- 
tion, so  that  the  party  to  whom  it  is  offered  must  understand 
that  if  he  takes  it  he  does  so  subject  to  such  condition. 
Where  a  party  believed  that  a  claim  against  him  had  been 
fully  paid,  but  finally  sent  a  check  for  part  of  the  amount 
with  a  statement  that  it  was  in  "full  settlement"  and  that 
he  would  "expect  in  return  a  receipt  in  full"  and  the  check 
was  retained  but  the  party  retaining  it  afterwards  brought 
suit  for  the  balance  of  his  claim,  it  was  held  that  the  accep- 
tance of  the  check  resulted  in  an  accord  and  satisfaction.  ^^ 

It  must  be  borne  in  mind  that  an  accord  is  not  a  defense 
to  the  original  debt  unless  the  promisee  therein  agrees  to 
accept  the  agreement  itself  in  satisfaction  of  his  debt;  so 
that  in  case  it  is  not  performed  his  only  remedy  will  be  an 

"Hosier  v.  Hursh,  151  Pa.  St.,  415.        Hutten  v.  Stoddard,  83  Ind.,  539. 
«  Brown  v.  Symes,  31  N.  Y.  Sup.,  62  9; 


DEPARTMENT  OF  LAW  121 

action  for  breach  of  the  new  agreement.  There  must  be  a 
valid  agreement  substituting  a  new  cause  of  action  in  place 
of  the  old.  Both  the  agreement  and  the  consideration  are 
new.  ^^  In  case  a  creditor  accepts  the  liability  of  a  third 
party  in  full  satisfaction  of  a  debt  due  him  by  another,  this 
extinguishes  the  original  debt.  In  order  to  have  this  effect, 
however,  the  liability  of  the  orginal  debtor  must  be  com- 
pletely cancelled  and  no  right  reserved  against  him.  The 
acceptance,  therefore,  of  the  note  of  a  third  party  by  a  cred- 
itor amounts  to  an  accord  and  satisfaction  of  the  debt  for 
which  the  note  was  given.  ^"  In  such  a  case,  however,  it  is 
possible  that  the  acceptance  of  the  note  may  be  conditioned 
upon  its  payment  and  that  if  the  note  is  not  paid  when  due, 
the  creditor  may  claim  the  fuU  amount  due  him.  ^^ 

§93.  Same — Subject-Matter. — The  subject  matter  of 
an  accord  and  satisfaction  may  in  general  be  anything  of 
value.  A  mere  expression  of  satisfaction  does  not  amount 
to  an  accord  and  satisfaction.  For  example,  in  an  action  of 
trespass  against  one  for  taking  another's  horses  the  owner's 
statement  that  he  was  satisfied  on  receiving  back  his  horses, 
could  not  be  pleaded  as  an  accord  and  satisfaction.  The  de- 
livery of  a  promissory  note  to  the  maker,  and  the  giving  by 
him  of  another  note  in  satisfaction,  though  of  a  less  amount, 
discharges  the  former  debt.  A  compromise  of  differences 
as  to  the  amount  due,  whereby  a  less  sum  than  that  claimed 
is  accepted  in  full  discharge,  bars  any  further  claim.  But 
where  the  amount  due  is  undisputed,  payment  of  a  part  of 
the  debt  is  no  consideration  for  a  promise  to  treat  the  debt 
as  thus  paid,  and  the  creditor  can  bring  suit  for  the  bal- 
ance. ^®  The  mere  statement  accompanying  a  check,  that 
it  is  sent  in  settlement  of  an  account  for  a  larger  sum,  does 
not  bind  the  creditor  to  treat  it  other  than  as  a  part  payment 
by  the  debtor.  ^^ 

§94.  By  Operation  of  Law. — (a)  By  Death. — Death 
of  either  party  terminates  all  contracts  for  personal  ser- 
vices, or  those  involving  personal  relations,  such  as  those  for 
labor,  professional  services,  personal  skill,  agency,  partner- 

"  Rogers  v.  City  of  Spokane,  9  Wash.,  85. 

168;  Kromer  V.    Heim,    75    N.    Y.,  '*  Sanders    v.    Bank,    13    Ala.,    353; 

574.  Conkling  v.  King,  10  Barb.,  3  72. 

*7  Hunter  v.  Moul,  98    Pa.    St.,    13;  "Fuller  v.  Kemp.,  138  N.  Y.,  231. 

N.  Y.  Bank  v.  Fletcher,  5  Wend.,  =»  Curran  v.  Rummell,  118  Mass.,  482. 


122       AMERICAN  EXTENSION  UNIVERSITY 

ship,  and  the  like.  Those  contracts  wherein  only  rights  or 
interests  in  property  are  involved,  are  not  usually  affected 
by  death,  but  must  be  performed  by  the  deceased's  estate. 

(b)  By  Receiving  Better  Security. — The  acceptance 
of  a  higher  grade  of  security,  in  the  place  of  a  lower — the 
former  being  more  effective  in  the  eye  of  the  law — extin- 
guishes the  lower,  regardless  of  the  intention  of  the  parties. 
For  this  reason  a  judgment  extinguishes  a  right  of  action,  ^^ 
the  former  creating  a  greater  and  more  binding  obligation  in 
law  than  the  latter.  This  extinguishment  is  often  called 
merger,  but  a  strict  interpretation  of  the  word  "merger" 
conveys  the  idea  of  absorbing  rather  than  of  discharging, 
and  hence  is  not  accurately  used  in  this  connection.  To 
thus  work  a  discharge  it  is  essential  that  the  superior  se- 
curity, or  contract,  be  given  to  discharge  the  inferior  rather 
than  to  be  in  addition  thereto.  -^  Furthermore  the  subject- 
matter  of,  and  the  parties  to,  the  contract  must  be  the  same. 

(c)  By  Unauthorized  Alteration. — If  an  alteration  of 
a  written  contract  by  an  addition  or  erasure  is  such  that  it 
changes  the  legal  effect  of  the  instrument,  and  is  made  with 
such  intention  by  a  party  to  the  contract  or  his  agent  with- 
out the  consent  of  the  other  party,  the  contract  is  discharg- 
ed. ^^  The  alteration  must  be  material, — such  as  changing 
the  date  of  a  note,  or  the  time  of  payment ;  ^*  adding 
to  or  withdrawing  the  name  of  the  maker  or  drawer;  ^^  Add- 
ing or  erasing  words  of  negotiability;  ^°  or  procuring  the 
signature  of  a  witness  to  a  bond  which  was  unattested  at  its 
date  of  execution,  and  the  like.  ^^  It  is  not  necessary  that 
the  alteration  be  prejudicial  against  the  party  whom  it  is 
sought  to  make  liable;  the  simple  fact  of  such  alteration 
suffices. 

(d)  By  Bankruptcy. — Bankruptcy  or  insolvency,  dis- 
charges the  person  adjudged  bankrupt  or  insolvent  from 
contractual  liabilities,  when  he  is  discharged  by  order  of  the 
court  in  which  the  bankruptcy  or  insolvency  proceedings 

"  Hartford  v.  Street,  46  la.,  594;  Cole  v.  Clark,  56  N.  Y..  34. 

V.  Favorite,   69   111.,   457.  "Crawford  v.  Bank,   100  N.  Y.,  50; 
« Martin  v.    Hamlin,    18    Mich.,    364;  Charlton  v.  Reed,  61  Iowa,  166. 

Bill  V.  Porter,  9    Conn.,    30;    An-  =»  Henry  v.  Coats,  17  Ind.,  161;  Wal- 

drews  v.  Smith,  9  Wend.,  53;  Hor-  lace  v.  Jewell,  21  Ohio  St.,  163. 

ton  V.  Maffit,  14  Minn.,  289.  »"  Davis  v.  Henry,  13  Neb.,  497. 

*»  Lee  V.  Star  Bird,  55  Me.,  491;  Ivory  ="  Adams   v.    Frye,    3    Mete.    (Mass.), 

V,  Michael,  33  Mo.,  398;   McGrath  103. 


DEPARTMENT  OF  LAW 


123 


were  pending.    A  detailed  treatment  of  this  subject  will  be 
taken  up  under  the  subject  of  "Bankruptcy." 

(e)By  Statute  of  Limitations. — Strictly  speaking,  mere 
lapse  of  time  does  not  discharge  a  contract.  However  the 
right  to  sue  on  claims,  is,  by  statute  in  every  state  known 
as  the  Statute  of  Limitations,  limited  to  a  prescribed  term, 
which  if  invoked  by  the  party  to  be  charged,  bars  the  right 
of  recovery.  Hence,  if  a  defendant  pleads  this  statute  after 
lapse  of  the  statutory  time  covering  the  claim  sued  on,  the 
contract  is,  to  all  practical  intents,  discharged.  ^* 

Claims  against  which  the  statutory  time  has  run  are 
commonly  termed  '* outlawed."  If  part  pajrment  is  made 
on  such  a  claim,  or  a  new  promise  to  pay  it  is  given,  the  claim 
is  revived  and  the  statute  begins  again  to  run  against  it  from 
the  time  of  such  part  payment  or  new  promise. 

§94.  By  Breach. — (a)  In  General. — Breach  of  a  con- 
tract is  brought  about  by  the  breaking  of  an  obligation 
therein  imposed.    It  always  gives  the  injured  party  a  right 


^  The  statutory  limit  of  the  right  to 
maintain  legal  action  on  various 
broken  contracts,  varies  in  the  sev- 
eral states  and  territories,  and  as  to 
different  classes  of  obligations.  The 
following  table  gives  the  existing 
terms,  expressed  in  years  for  all 
jurisdictions. 
States  and 
Territories.  Open     Notes  & 

Acc't.    uns'led     Judg'ts 
contracts 

Arizona    6  4  5 

Alabama     3  6  (e)       20 

Alaslca     6  6  (e)      10 

Arlcansas     ....        3  5  10 

California     ...        4  4  (o)         5 

Colorado     6  6  20 

Conn.     6  6 

Delaware    3  6  10 

D.    C 3  3  (f )       12 

Florida     4  5  (h)      20 

Georgia    4  6  (h)        7  (p) 

Idaho     4  5  6 

Illinois     5  10  20(np) 

Indiana    6  10  20 

I.    T 3  5  10 

Iowa    5  10  20    (n) 

Kansas     3  5  5 

Kentucky    5  15  15    (v) 

Louisiana    ....        3  5  10 

Maine    6  6  (j)       20 

Maryland    3  3  (f )       12 

Mass 6  6  20 

Michigan    6  6  10 

Minnesota   ....        6  6  10 

Mississippi    ...        3  6  7 

Missouri     5  10  10 

Montana    5  8  10  (k) 

Nebraska 4  5  10  (p) 

Nevada    4  4  6 


N.  H .        6  6  (s)       20 

New  Jersey  ...        6  6  (s)       20 

New  Mexico    . .        4  6  7 

New  York   ....        6  6  (s)       20    (1) 

N.  C 3  3  (e)       10  (m) 

N.  D 6  6  10 

Ohio    6  15  15 

Oklahoma   ....        3  5  5    (t) 

Oregon 6  6  (e)      10 

Penn 6  6(h)         5 

R.   1 6  (a)         6  (h)      20 

S.  C 6  6  20 

S.  D.    6  6  (h)      20    (r) 

Tennessee   ....        6  6  10 

Texas   2  (&)        4  10 

Utah    4  6  8 

Vermont    6  6  (y)         8    (1) 

Virginia     2  (&)       5(e)       10    (s) 

Wash 3  6  6 

W.  Va 5  10  10  (s) 

Wisconsin    6  6(h)      20  (r) 

Wyoming  ....  8  (u)  5  (u)  21 
(A)  Between  merchants,  20  years.  (E) 
Under  seal,  10  years.  (F)  Under 
seal,  12  years.  (H)  Under  seal,  20 
years.  (I)  Under  seal,  or  not  nego- 
tiable, 17  years.  (J)  Witnessed,  20 
years.  (K)  Justice,  5  years.  (L.) 
Justice,  6  years.  (M)  Justice,  7 
years.  (N)  Justice,  10  years.  (O) 
Foreign,  2  years.  (P)  Foreign,  5 
years.  (R)  Foreign,  10  years.  (S) 
Foreign,  same  as  State  where  ren- 
dered, but  not  over  10  years.  (T) 
Foreign,  1  year.  (U)  On  debts  or 
judgments  incurred  before  debtor 
became  resident,  suit  must  be  be- 
gun within  1  vear  after  residence 
is  secured.  (V)  From  date  of  last 
execution.  (Y)  Witnessed,  14  years. 
(&)  Store  accounts,  other  accounts 
3  years.  Accounts  between  mer- 
chants,   5    years. 


124       AMERICAN  EXTENSION  UNIVERSITY 

of  action,  and  often  discharges  the  contract  entirely.  In  the 
latter  case  either  party  cannot  procure  performance  by  the 
other,  as  the  courts  have  nothing  upon  which  to  base  a  legal 
remedy.  This  form  of  discharge  is  more  often  applicable 
to  certain  terms  or  provisions  of  a  contract,  rather  than 
to  the  contract  as  a  whole.  In  such  case  the  contractual 
relation  is  not  extinguished  unless  the  particular  provision 
is  sufficiently  important  to  destroy  the  effect  of  the  entire 
agreement. 

(b)  Renunciation. — Renunciation  of  a  contract,  in  or- 
der to  give  a  right  of  action  immediately  upon  the  refusal 
of  performance,  must  be  distinct  and  unequivocal;  must  be 
acted  upon  by  the  promisee  as  an  absolute  refusal;  and 
must  work  a  prejudice  to  him.  The  act  of  renunciation  con- 
sists in  doing  something  inconsistent  with  the  contractual 
relation,  or  making  a  positive  statement,  capable  of  being 
proved,  of  an  absolute  refusal  to  perform.  It  may  justify 
the  other  party  in  treating  the  contract  as  rescinded,  ,and 
excuse  him  from  performance  of  his  part,  before  taking 
proceedings  against  the  renunciator  to  enforce  his  rights. 
It  may  also  prevent  the  renunciator  from  afterwards  con- 
tinuing the  contract  by  withdrawing  his  refusal  to  perform 
if  the  other  party  has,  in  the  meantime,  acted  upon  such  dis- 
avowal. 

If  the  renunciation  by  a  buyer  in  a  contract  of  purchase, 
does  not  occur  until  after  performance  by  the  other  part} 
has  begun,  and  such  renunciation  is  a  refusal  to  perform  the 
remainder  of  the  contract  by  refusing  to  receive  the  balance 
of  the  goods,  the  seller  is  exonerated  from  farther  perform- 
ance and  may  bring  an  action  against  the  buyer  immediate- 
ly for  the  goods  already  delivered  and  for  the  loss  of  profits 
on  the  balance  refused.  Such  were  the  facts  and  ruling  in 
Hale  et  al.,  v.  Trout  et  al.,  ^^  in  which  the  plaintiffs  brought 
an  action  for  the  price  of  lumber  already  sold  and  delivered 
under  an  installment  contract,  and  for  damages  for  breach 
of  the  contract.  Judgment  was  rendered  in  favor  of  the 
plaintiffs  upon  the  ground  that  they  need  not  deliver  the 
balance  of  the  lumber  after  the  purchasers '  absolute  ref usa] 
to  accept  it,  but,  having  stood  ready  to  perform,  had  a  right 
to  sue  upon  the  contract  for  loss  of  profits  thereunder  and 

»35  Cal.,  229. 


DEPARTMENT  OF  LAW  125 

to  recover  accordingly. 

From  the  foregoing  it  is  apparent  that  a  contract  may 
be  renounced  while  it  is  yet  executory,  and  before  any  per- 
formance on  either  side  is  due;  and  the  injured  party  may 
treat  the  contract  as  discharged. 

(c)  By  Impossibility,  or  Failure,  to  Perform. — ^Ina- 
bility, or  refusal,  to  perform  a  contract  in  part  or  in  whole 
is,  of  course,  not  an  actual  breach  until  the  contract  time  of 
performance  arrives.  However,  where  one  has  voluntarily 
put  it  out  of  his  power  to  perform,  even  though  the  time  of 
performance  is  not  due,  the  contract  may  be  treated  by  the 
other  party  as  discharged  and  bring  an  action  thereon  im- 
mediately. In  cases  where  demand  is  necessary  before  per- 
formance is  due,  and  performance  is  impossible  because  of 
the  promissor's  act,  the  courts  have  held  that  demand  need 
not  be  made  before  suit.  ^^ 

In  the  case  of  Woolner  et  al.,  v.  Hill  et  al.,  ^^  the  plain- 
tiffs contracted  with  the  defendants  to  buy  a  certain  quan- 
tity of  alcohol,  to  be  delivered  at  the  rate  of  500  barrels  per 
month,  payment  on  delivery.  Defendants,  one  month  after 
the  execution  of  the  contract,  made  a  general  assignment  in 
favor  of  creditors.  Plaintiffs  brought  action  for  breach  of 
contract  and  the  defendants  defended  on  the  ground  that  no 
demand  or  tender  was  made  by  the  plaintiffs  before  suit. 
The  court  held  that  the  defendants  having  voluntarily  dis- 
abled themselves  from  performing  the  contract  by  making 
the  assignment  could  not  require  tender  or  offer  of  perform- 
ance by  the  plaintiffs,  who  stood  ready  to  perform,  and  that 
in  such  cases  a  demand  is  not  necessary. 

'"Boyle  V.  Guysinger,  12    Ind.,    273;     "93  N.  Y.,  576. 
Smith  V.  Jordan,  13  Minn.,  264. 


QUIZZEE. 

DISCHARGE  OP  CONTRACTS. 

l-§86.    What  is  meant  by  the  discharge  of  a  contract? 

2-  Howmay  a  contract  be  discharged  *? 

3-  Name  the  different  ways  in  which  this  may  be  ac- 

complished. 

4-  What  does  the  consideration  of  the  discharge  of 

contracts  involve  ? 


126       AMERICAN  EXTENSION  UNIVERSITY 

5-  What  is  the  general  rule  as  to  when  rights  of  ac- 

tion on  contracts  accrue  ? 

6-§87.  Describe  the  simplest  form  of  the  discharge  of  con- 
tracts. 

7-  What  discharges  a  contract  based  upon  an  execut- 

ed consideration? 

8-  Does  performance  by  one  party,  where  a  promise 

is  given  for  a  promise,  discharge  the  contract? 
9- §88.    Define  a  release,  or  rescission,  of  a  contract. 

10-  What  is  the  effect  on   a   contract   of   a   release 

thereof? 

11-  Upon  what  class  of  contracts  is  such  an  agreement 

binding — and  when? 

12-  What  is  necessary  in  such  agreement  to  release  a 

right  of  action  which  has  accrued  on  a  contract  ? 

14-  What  is  an  essential  factor  of  a  contract  of  release? 

15-  What  distinction,  as  to  necessity  of  additional  con- 

sideration, is  there  between  mutual  releases  and 
those  running  only  to  one  party? 

16-  Can  written  contracts  be  released  by  parol — Can 

sealed  instruments — and  why? 

17-  Is  a  parol  release  without  consideration  valid? 

18-  What  is  the  effect  on  a  contract  of  the  surrender 

of  the  evidence  of  indebtedness  to  the  maker? 

19-  What  is  necessary  to  make  such  a  surrender  a  valid 

discharge  ? 
20-§89.    What  effect  on  a  contract  does  the  material  chang- 
ing of  its  terms  have  ? 

21-  What  is  necessary  to  cause  such  change  to  work  a 

discharge,  and  how  can  it  be  done  ? 

22-  How  does  the  substitution  of  new  terms  in  a  con- 

tract differ  from  waiver? 

23-  Give  illustrations  of  a  change  in  contract-terms 

not  affecting  its  discharge. 

24-  Under  what  circumstances  would  alterations  in  a 

contract  annul  it  ? 

25-§90.  Can  a  contract  contain  elements  of  its  own  cancel- 
lation ?    If  so  name  some. 

26-  When  does  non-fulfillment  of  a  contract,  contem- 

plated by  the  contract  itself,  impose  no  lia- 
bility? 


DEPARTMENT  OF  LAW  127 

27-  What  is  a  condition  subsequent,  and  when  does  it 

affect  a  contract  ? 

28-  Give  an  example  of  a  contract  containing  such  a 

condition — describe  fully. 

29-  What  implied  events  in  contracts  may  terminate 

them? 

30-  Give  an  instance  of  contracts  containing  an  option- 

al termination. 
31-§91.    What  can  you  say  as  to  impossible  conditions  in 
(a)         contracts  and  their  effect  thereon? 

32-  What,  likewise,  as  to  contracts  possible  in  them- 

selves, but  not  performed  through  inevitable  ac- 
cident. 

33-  How  can  one  protect  himself  from  liability  under 

such  circumstances? 

34- (b)  Does  legal  impossibility  to  perform  a  contract  ever 
discharge  from  liability  thereon — if  so  when? 

35- (c)  What  effect  on  a  contract  does  destruction  of  its 
subject  matter  have? — state  fully. 

36-  State  the  facts  and  the  decision  in  the  case  of  Dex- 

ter V.  Norton. 

37- (d)  Does  incapacity  to  perform  a  contract  ever  work 
its  discharge — if  so  what  contracts,  and  when? 

38-  How  do  courts  usually  construe  personal  service 

contracts  ? 

39-  What  is  the  rule  as  to  recovery  under  such  con- 

tracts where  they   have    been   partially   per- 
formed? 
40- §92.     Give  the  legal  notion  of  accord  and  satisfaction. 

41-  Define  accord  and  satisfaction. 

42-  What  do  the  parties  thereto  agree  ? 

43-  What  is  necessary  to  make  an  offer  operate  as  an 

accord  and  satisfaction? 

44-  Give  an  illustration  where  the  retaining  of  a  check 

so  operated. 

45-  When  is  an  accord  and  satisfaction  a  sufficient 

defense  ? 

46-  What  effect  on  a  debt  has  the  acceptance  by  the 

creditor,  of  the  liability,  therefor,  of  a  third 
party? 

47-  What  is  necessary  in  order  to  work  such  effect? 


128       AMERICAN  EXTENSION  UNIVERSITY 

48-  Does  the  taking  of  a  third  party's  note  have  the 

same  effect  *? 

49-  Does  the  question  of  the  payment  or  non-payment 

of  such  note  at  all  affect  the  matter — if  so  how? 
50-§93.    What  may  be  the  subject  matter  of  an  accord  and 
satisfaction? 

51-  Does  simply  expressing  one 's  self  as  satisfied  with 

a  certain  thing,  work  an  accord  and  satisfaction? 
— give  examples. 

52-  Does  delivery  and  acceptance  of  a  note  for  an 

amount  less  than  the  full  claim  discharge  the 
debt? 

53-  What  can  you  say  as  to  the  discharge  of  a  debt 

upon  payment  of  a  lesser  sum  in  cases  of  a  dis- 
puted, and  those  of  an  undisputed,  amount  of  in- 
debtedness ? 

54-  Is  a  creditor  bound  by  the  statement  accompany- 

ing a  check  for  a  lesser  sum  than  the  debt,  that 
it  is  sent  in  full  settlement  ? 

55-  What  may  he  do  with  such  a  check? 

56-§94     What  contracts  does  death  wholly  terminate? 
57- (a)      What  contracts,  if  any,  continue  in  force  after 

death  of  a  party  thereto? 
58- (b)      What  effect  does  the  obtaining  of  a  higher  grade 

of  security  have  upon  the  lesser  in  a  contract? 

59-  What  effect  upon  a  right  of  action  has  a  judgment 

thereon? 

60-  What  is  such  extinguishment  often  called,  and  is 

such  designation  accurate — and  why? 

61-  What  is  essential  to  have  a  superior  security  work 

a  discharge  of  an  inferior  one? 
62- (c)      Does  the  unauthorized  alteration  of  a  contract  af- 
fect it — if  so,  how,  and  what  is  essential  to  such 
result? 

63-  Name  several  kinds  of  alterations  that  will  dis- 

charge a  contract. 

64-  Does  the  intention  with  which  such  alterations 

are  made  affect  the  legal  effect? 
65- (d)      What  effect  on  contract  liability  does  bankruptcy 
have? 


DEPARTMENT  OF  LAW  129 

66- (e)      Does  lapse  of  time  ever,  strictly,  discharge  an  ob- 
ligation? 

67-  Wliat  right  arising  from  contract  may  lapse  of 

time  affect — and  how  ? 

68-  Describe  the  Statute  of  Limitations. 

69-  What  term  is  commonly  applied  to  obligations 

against  which  such  statutory  time  has  run? 

70-  What  will  revive  an  "outlawed"  claim? 

71-  From  what  time  will  such  statute  again  begin  to 

run? 
72-§95     How  are  breaches  of  contracts  brought  about? 
73- (a)      What  right,  and  to  whom,  does  the  breach  of  a 

contract  give? 
74-  What  other  effect  does   such   breach   sometimes 

have? 
75- (b)      What  is  the  renunciation  of  a  contract? 

76-  What  is  necessary  to  give  an  immediate  right  of 

action  thereon? 

77-  In  what  does  the  act  of  renunciation  consist  ? 

78-  What  effect  upon  the  other  party  may  the  renunci- 

ation by  one  have? 

79-  What  effect  on  a  seller's  rights  and  liabilities  has 

the  refusal  of  a  buyer  to  receive   all   goods 
bought? 

80-  What  were  the  facts  and  the  judgment  in  the  case 

of  Hale  V.  Trout? 

81-  When,  only,  can  a  contract  be  renounced? 

82-  How  may  the  injured  party  treat  a  renounced  con- 

tract? 
83- (c)      When  does  inability  or  refusal  to  perform  consti- 
tute a  breach  of  contract  ? 

84-  What  is  the  rule  where  one  voluntarily  incapaci- 

tates himself  from  fulfilling  a  contract  before 
time  of  performance  is  due? 

85-  Give  the  facts  and  judgment  in  the  case  of  Wool- 

ner  v.  Hill. 

86-  What  were  the  court's  holdings  in  that  case? — be 

specific  and  full.  ^  «  ^ 


130       AMERICAN  EXTENSION  UNIVERSITY 

LESSON  9.— 

CHAPTER  XIL 

ACTIONS  AND  DEFENCES. 

§96.  When    Right    of    Action    Accrues. 

97.  Election  of  Remedies. 

98.  Defences  To   Actions  on  Contracts. 

99.  Duress. 

(a)  Definition. 

(b)  Of    Persons. 

(b)  Of  Goods. 

(c)  Of  Goods. 

100.  Fraud. 

(a)  Definition. 

(b)  Distinctions. 

(c)  Essential    Features. 

(d)  Falsity    of    Representation. 

(e)  Nature    of    Misrepresentation. 

(f)  Reliance  on  False  Statements. 

(g)  Intention    That    Statement  be  Acted  Upon. 
(h)  Statement  to  Third  Party. 

(i)    Damage, 
(j)    Remedies. 

101.  Misrepresentation. 

(a)  Distinguished  From  Fraud  and  Mistake, 

(b)  Essentials. 

(c)  Matters  of  Opinion.  .    ' 

(d)  True   Statement — Knowledge  of  Facts. 

(e)  Materiality. 

(f)  Effect  in  General. 

(g)  Effect  in  Law. 
(h)  Effect  in  Equity. 

lO.i'.  Mistake. 

(a)  In  General,  and  Definition. 

(b)  As  to  Subject  Matter. 

(c)  Ignorance  of  Law. 

(d)  As  to  Identity  of  Party. 

(e)  Effect. 

103.  Undue  Influence. 

(a)  Nature. 

(b)  Effect  and  Remedy. 

§96.  When  Right  of  Action  Accrues. — The  mere  fact 
that  a  person  has  entered  into  a  contract  with  another  can 
give  no  cause  of  action,  and  none  can  arise,  until  there  is 
some  breach  of  such  contract,  which,  therefore,  must  be 
regarded  as  the  cause  of  action.  The  contract  may  give  a 
party  the  right  to  demand  its  performance  according  to  its 
terms,  but  there  is  no  delict,  and  no  cause  of  action,  until  the 
other  party  refuses  or  neglects  to  perform  some  duty  re- 
quired of  him  by  the  terms  of  the  contract.  ^ 

§97.  Election  of  Remedies. — It  frequently  happens 
that  as  the  result  of  certain  breaches  of  contract — more  par- 

»Tilllngha8t  v.  Boston  &  P.  R.,  Lumber  Co.,  39  S.  C,  484. 


DEPARTMENT  OF  LAW  131 

ticularly,  perhaps,  in  those  cases  of  breaches  of  contractual 
obligations  created  by  law,  and  of  obligations  imposed  by 
law,  in  addition  to  those  voluntarily  assumed  by  parties  to 
the  contract  itself — the  party  injured  by  the  breach  has 
more  than  one  kind  of  remedy,  or  of  action,  available  for  his 
redress.  In  such  cases  he  has,  of  course,  a  choice  of  reme- 
dies, but  he  must  make  a  choice ;  he  cannot  pursue  two  ac-  ^ 
tions  at  the  one  time  upon  the  same  cause  of  action.  ^  This  " 
matter  is  one  of  legal  procedure  rather  than  of  substantive 
law  and  hence  is  not  properly  within  the  scope  of  the  pres- 
ent lesson.  It  will  be  fully  treated  under  the  subjects  of 
Actions  and  of  Election  of  Remedies,  in  the  second  year's 
lessons. 

§98.  Defences  to  Actions  on  Contracts. — The  defence 
to  an  action  on  contract  must  necessarily  be  based  upon 
some  fact  or  factor  arising  from  the  contract  itself,  either 
in  connection  with  its  inception  or  consummation,  or  incor- 
porated therein.  Several  items  of  possible  defence  having 
special  reference  to  the  competency  of  parties ;  the  fact,  suf- 
ficiency, or  failure  of  consideration;  the  legality  of  the  pur- 
pose of  the  contract,  and  the  like,  have  been  presented  in 
our  discussion  of  those  topics.  In  addition,  there  are  sev- 
eral other  matters,  any  of  which,  if  present  in  the  contrac- 
tual relation,  renders  the  contract  thereby  affected,  void  or 
voidable,  at  the  instance  of  the  injured  party,  and  which  he 
can,  therefore,  invoke  in  absolute  and  total  defence  of  the 
contract  if  he  elects  to  avoid  it.  The  principal  matters  of 
this  character  are  duress,  fraud,  misrepresentation,  mistake 
and  undue  influence. 

§99.  Duress. — (a)  Definition. — ^Duress  consists  of 
actual  or  threatened  violence  or  imprisonment.  There  may 
be  duress  of  person,  or  duress  of  goods,  either  of  which  if 
effectually  exercised  will  be  sufficient  ground  of  avoiding  a 
contract  made  because  of  its  influence  upon  one.  Duress  of 
the  person  is  of  two  kinds:  (1)  duress  of  imprisonment — 
which  is  compulsion  through  an  actual  illegal  restraint  of 
one's  personal  liberty;  and  (2)  duress  of  mind, — ^which  is 
compulsion  through  creating  a  rational  fear  of  loss  of  life, 
of  bodily  injury,  or  by  actual  confinement. 

*  Peters  v.  Bain,  133  U.  S.,  670;  Haydock  v.  Cooper,  53  N.  Y.,  68. 


132       AMERICAN  EXTENSION  UNIVERSITY 

(b)  Of  Person. — An  unlawful  imprisonment  of  a  par- 
ty, or  his  lawful  imprisonment  through  abuse  of  legal  pro- 
cess; imprisonment  of  a  near  relative  of  his  to  whom  he 
owes  some  legal  duty;  or  unlawful  and  great  bodily  harm  to 
him  or  to  such  relative;  or  the  threatening  of  such  imprison- 
ments or  harm,  is  din-ess  of  person.  Duress,  therefore,  can 
arise  from  either  force  or  fear.  It  has  been  held  in  several 
states  that,  although  an  imprisonment  be  legal,  if  the  pro- 
cess be  sued  out  maliciously  and  without  probable  cause, 
the  party  imprisoned  was  under  duress.  ^  The  contracting 
party,  or  some  one  of  his  immediate  family,  must  be  the  sub- 
ject of  the  duress,  and  it  must  be  the  act  of  the  other  party 
to  the  contract,  or  of  his  agent.  ^  A  contract  entered  into  in 
order  to  relieve  a  third  person  from  duress  is  not  voidable 
on  that  ground,  although  release  from  duress  as  a  considera- 
tion for  a  contract  is  unreal  consideration  and  vitiates  a  sim- 
ple contract  for  that  reason. 

(c)  Of  Goods. — The  unlawful  detention,  seizure  or  de- 
struction of  the  property  of  another  is  duress  of  goodfe.  ^ 
Such  duress  exists  when  one  is  compelled  to  submit  to  an 
illegal  exaction  in  order  to  obtain  his  property  from  one  who 
refuses  to  surrender  possession  unless  the  exaction  is  endur- 
ed. ®  This  form  of  duress  is  not,  in  itself,  ground  for  avoid- 
ing a  contract,  but  if  the  detention  is  obviously  without 
right,  a  promise  based  upon  such  detention  is  void  for  want 
of  consideration.  Money  paid  for  the  release  of  goods  from 
duress  may  be  recovered  as  money  had  and  received  by  the 
other  party  which  rightfully  belongs  to  the  one  making  the 
payment.  The  party  pleading  duress  as  a  defense  must 
show  clearly  that  he  was  actually  influenced  by  it,  and  not 
by  any  other  cause  in  doing  the  thing  from  which  he  now  in- 
vokes belief.  '^ 

§100.  Fraud. — (a)  Definition. — Fraud  is  a  false  rep- 
resentation of  a  material  fact,  or  the  non-disclosure  of  a  ma- 
terial fact  under  such  circumstances  that  its  concealment 

•Severance  v,  Kimball,  8  N.  H.,  386;  188;  Shattuck  v.  Watson,  53  Ark., 

Watklns   v.    Baird,    6    Mass.,    506;  147. 

Strong   V.    Grannis,    26    Barb.    (N.  "  Benjamin  on  Sales,  §60. 

Y.,)    122;    Bowker   v.    Lowell,    49  « Hackley  v.  Headley,  45  Mich.,  570; 

Me.,    429;    Taylor    v.    Cottrell,    16  Scholey    v.    Mumford,    60    N.    Y., 

m.,  93.  498. 

*  City  Nat,  Bank  v.  Kusworn,  88  Wis.,  '  Hines  v.  Cours,  93  Ind.,  266. 


DEPARTMENT  OF  LAW  133 

amounts  to  a  false  representation,  made  with  knowledge  of 
its  falsity,  or  in  reckless  disregard  of  whether  it  is  true  or 
false,  to  one  who  did  not  know  that  it  was  false,  with  the  in- 
tention that  it  shall  be  acted  upon  by  the  other  party,  and 
which  is  acted  upon  by  him  to  his  injury. 

The  common  law  defined  fraud  in  an  exact  and  precise 
sense  which  allowed  no  flexibility  of  meaning;  but  in  equity, 
any  unfair  dealing  which  is  ground  for  equitable  relief  is 
called  fraud,  and  the  courts  of  equity  have  carefully 
refrained  from  confining  this  idea  within  the  limits  of  a  defi- 
nition. This  has  given  rise  to  what  is  termed  constructive 
fraud.  ^  Inasmuch  as  this  branch  of  fraud  is  peculiarly  ap- 
plicable to  cases  of  trust  relations,  it  will  be  treated  under 
the  subject  of  Equity  Jurisprudence. 

(b)  Distinctions. — Fraud  differs  from  mistake  in  that 
in  fraud  the  statement  of  the  adversary  party  is  the  cause 
of  the  false  impression,  while  this  is  not  the  case  in  mistake. 
It  differs  from  misrepresentation  in  that  a  misrepresenta- 
tion is  made  by  one  who  believes  it  to  be  true  and  is  justified 
in  such  belief  by  reason  of  the  surrounding  circumstances, 
while  fraud  is  committed  by  one  who  knows  that  his  state- 
ment is  false,  or  who  makes  it  positively  without  reasonable 
grounds  for  believing  it  to  be  true. 

Some  authors  treat  the  non-disclosure  of  material  facts  as 
distinct  from  fraud,  ^  but  the  better  reasoning  seems  to  be 
that  non-disclosure  amounts  to  fraud,  unless  there  is  no  le- 
gal duty  to  speak,  and  the  party  is  not  bound  by  good  faith 
to  disclose.  Otherwise,  the  non-disclosure,  or  concealment, 
is  equivalent  to  a  false  representation.  In  other  words, 
mere  silence,  or  non-disclosure  of  facts,  will  not  invalidate 
a  contract,  whatever  may  be  the  intention  in  failing  to 
make  the  disclosure,  except  in  contracts  made  between 
parties  where  full  faith  requires  it.  It  is  evident  that  non- 
disclosure, as  a  legal  term,  is  meaningless  unless  certain 
facts  exist  that  by  right  ought  to  be  disclosed;  and  such  is 
the  case  only  in  contracts  requiring  such  good  faith.  ^^ 

(c)  Essential  Features. — To  constitute  legal  fraud, 
the  representation  must  be  (1)  false, — which  includes  non- 
disclosure where  active  steps  are  taken  to  prevent  discov- 

*  Meldrum  v.  Meldrum,  15  Colo.,  478.  "Keats  v.  Lord  Cadogan,  10  C.  B. 
''Page  on  Contracts,  p.  99,  Sec,  56.  591. 


134       AMERICAN  EXTENSION  UNIVERSITY 

ery,  or  where  there  is  a  duty  to  disclose  the  facts  suppress- 
ed; (2)  it  must  be  of  a  past  or  existing  fact;  (3)  it  must  be 
of  a  material  fact;  (4)  it  must  be  such  that  the  other  party 
has  a  right  to  rely  on  it,  or  is  compelled  to  rely  on  it;  (5)  it 
must  be  made  with  a  knowledge  of  its  falsity,  or  in  reckless 
disregard  of  whether  it  be  true  or  false;  (6)  it  must  be  made 
directly  to  the  other  party  or  intended  to  reach  him  so  that 
he  will  act  upon  it;  (7)  he  must  be  actually  deceived  there- 
by; and,  (8)  it  must  result  in  an  injury. 

Under  the  subject  of  Mistake,  fraud  in  the  factum — or 
in  the  actual  drawing  up  of  a  contract — will  be  touched 
upon.  In  such  cases,  it  will  be  seen  that  the  contract  is  gen- 
erally held  to  be  void,  and  cannot  be  rescinded,  because 
there  is,  legally,  nothing  to  rescind.  It  is  simply  annulled, 
and  the  defrauded  party  is  placed  in  his  original  position. 
Thus,  substituting  a  quit-claim  deed  for  a  mortgage;  ^^  or  in- 
serting, without  the  knowledge  of  the  other  party,  a  clause 
making  a  certain  pledge  collateral  security  for  all  debts  ow- 
ing, instead  of  for  only  the  debt  in  question;  ^^  or  a  false 
statement  as  to  the  manner  of  payment  in  a  written  order;  ^^ 
each  makes  such  instruments  void.  Under  the  present 
treatment  of  the  subject,  fraud  is  considered  only  in  those 
cases  whereby  one,  knowing  the  parties,  consideration  and 
subject-matter,  is  induced  to  enter  into  a  contract  by  false 
representations  of  the  other  party. 

(d)  Falsity  of  Representation. — The  form  in  which  a 
false  representation  is  made  is  immaterial.  It  may  consist 
of  an  actual  false  statement;  of  statements  partly  true  but 
framed  so  as  to  mislead;  or  of  either  words  or  conduct  which 
prevent  the  other  party  to  the  contract  from  discovering  the 
truth.  There  is  no  difference  in  principle  between  fraud  in 
fact  and  fraud  in  law.  Wliere  the  direct  and  inevitable  con- 
sequence of  an  act  is  to  delay,  hinder,  or  defraud  creditors, 
the  presumption  at  once  conclusively  arises  that  such  illegal 
object  furnished  one  of  the  motives  for  doing  it,  and  it  is 
thus,  upon  this  ground,  held  to  be  fraudulent.  ^'^  Many  of 
the  cases  illustrating  this  principle  are  also  examples  of  ac- 
tive concealment.     Thus  fraud  was  held  to  exist  where  a 

"  Givan  v.  Masterson,  152  Ind.,   127.  St.,  165. 

"Haldeman   v.   Bank,   19   Ky.   L.   R.,  "Robinson   v.     McKenna,     21    R.    I., 

1691.  117. 

"Clinch,  etc.  Co.,  v.  Willing,  180  Pa. 


DEPARTMENT  OF  LAW  135 

judgment  of  over  seven  thousand  dollars  was  bought  for 
four  hundred  dollars,  the  vendee  not  disclosing  that  the 
judgment  debtor  was  dead,  leaving  an  estate  worth  six  thou- 
sand dollars.  ^^ 

In  contracts  of  sale,  disclosure  is  not  ordinarily  incum- 
bent on  the  seller.  The  rule  is,  caveat  emptor — "let  the 
buyer  beware."  ^®  Even  if  the  contract  is  one  which  by  the 
statute  of  frauds  must  be  in  writing,  or  some  note  or  memo- 
randum thereof  must  be  in  writing,  oral  misrepresentation, 
if  containing  the  other  elements  of  fraud,  constitutes 
ground  for  recovering  money  paid  under  an  executed  con- 
tract. 

(e)  Nature  of  Misrepresentation. — A  mere  expres- 
sion of  opinion,  belief  or  expectation,  however  unfounded, 
will  not  invalidate  a  contract,  nor  give  cause  for  an  action 
for  deceit.  Notwithstanding  this,  a  representation  of  an 
intention,  may  amount  to  a  fraudulent  representation.  Rep- 
resentations of  fact  may  be  better  illustrated  by  examples 
than  by  an  abstract  rule.  Thus,  statements  that  a  water- 
right  is  sufficient  to  irrigate  all  the  land  sold;  ^"  or  that  a 
stream  never  overflowed  on  the  land  sold;  ^®  or  that  a  certain 
amount  of  hay  has  been  cut  from  the  land;  ^^  or  that  a  pat- 
ented article  has  had  a  certain  sale ;  ^^  are  material  represen- 
tations. On  the  other  hand,  a  statement  which  amounts  to 
a  mere  speculation,  or,  even  a  statement  of  a  material  fact 
which  is  given  as  a  matter  of  belief  only,  are  considered  as 
opinions. 

(f )  Reliance  on  False  Statement. — In  order  that  a 
person  may  be  entitled  to  rescind  a  contract  or  maintain  an 
action  for  deceit  in  procuring  same,  the  false  representa- 
tions must  have  been  of  such  a  character,  and  made  under 
such  circumstances,  that  he  had  a  right  to  rely  on  them.  If 
the  party  who  claims  to  have  been  misled  acted  when  he  did 
not  know  that  such  false  statement  had  been  made;  ^^  or  if 
he  disbelieves  the  statements  at  the  time  of  the  alleged 

^•Gottschalk   v.      Kircher,      109   Mo.,  "  Laidlaw    v.    Organ,    2    Wheat.,    (U. 

170.      Vendee   further      represent-  S.,)    178. 

ed   that   the   judgment-debtor   was  "Hill  v.  Wilson,  88  Cal.,  92. 

alive     and     execution-proof.       See  "  Oakes  v.  Miller,  11  Colo.  App.,  374. 

also  Roseman  v.  Canovan,  43  Cal.,  '®  Coon  v.  Atwell,  46  N.  H.,  510. 

110;  George  v.  Johnson  6  Humph.,  =«  King  v.  White,  119  Ala.,  429. 

(Tenn.,)    36;    Coles   v.    Kennedy,    81  ==' Burnett  v.  Hensley,  118  la.,  575. 

Iowa,  360. 


136       AMERICAN  EXTENSION  UNIVERSITY 

fraud;  ^^he  cannot  be  said  to  be  defrauded.  One  to  whom 
false  statements  are  made  and  who  believes  them  in  spite  of 
information  to  the  contrary  received  from  others  may  in  law 
be  justified  in  relying  thereon  and  may  hold  the  party  mak- 
ing such  statements,  liable  for  fraud.  ^^  It  is  necessary  that 
the  false  representation  be  the  sole  motive  which  influenced 
the  party  to  whom  it  was  made.  ^^ 

The  courts  are  somewhat  indefinite  as  to  the  necessity 
of  investigation  by  the  person  to  whom  the  representation 
is  made!  It  is  clearly  settled  however,  that  negligence,  on 
the  part  of  the  person  to  whom  the  false  statements  are 
made,  in  investigating  the  truth  thereof,  is  no  defense  for 
the  other  party  in  an  action  of  fraud  brought  by  such  former 
person,  on  the  contract.  ^^  Many  cases  hold  that  where  the 
facts  are  generally  accessible  to  both  parties,  public  policy 
demands  that  the  law  should  require  persons  to  whom  rep- 
resentations are  made  to  use  all  reasonable  means  to  deter- 
mine the  truth,  and  that  a  failure  to  investigate  may  amount 
to  inexcusable  negligence  precluding  the  negligent  party 
from  obtaining  relief.  ^® 

(g)    Intention  That  Statement  Be  Acted  Upon. — It  is 

not  necessary  that  the  intention  be  to  deceive.  If  the  state- 
ment has  had  the  elements  of  fraud  hitherto  discussed,  it  is 
sufficient  if  the  party  making  it  intends  it  to  be  believed,  and 
action  by  the  other  party  in  reliance  thereon,  to  be  taken.  ^^ 
Thus  if  he  knows  the  statement  is  false  but  believes  that  it 
will  come  true  thereafter,  he  is  guilty  of  fraud.  ^^ 

(h)  Statement  to  Third  Party. — As  a  general  rule, 
unless  the  person  making  the  false  statement  intends  to  in- 
duce action  by  a  particular  person,  who  in  fact  acts  thereon, 
legal  fraud  does  not  exist.  So,  if  A  makes  a  false  state- 
ment to  C,  B's  agent,  to  induce  B  to  act  thereon,  this  is 
fraud  if  it  would  be  fraud  had  A  made  the  statement  to 

=°City    National    Bank    v.    Hickox,    4  »« Andrus  v.   Refining  Co.   130   U.   S., 
Johns.,  (N.  Y.,)   212.  643.      Such  is     the  law     in  Ariz., 

=«  Morrill  v.   Palmer,   68  Vt.,   1;   Vir-  Ark.,  Cal.,  Ga.,  Ida.,  111.,  Ind.,  la., 

ginia  Land  Co,  v.   Haupt,   90  Va.,  Ky.,  Me.,  Md.,  Mass.,  Mich.,  Minn., 

533.  Mo.,  N.  H.,  N.  Y.,  Or.,  Pa.,  Utah., 

'"Sioux   National   Bank   v.    Bank,    56  Va.,  Wash.,  and  Wis., 

Fed.,   139;    Sprague  v.   Taylor,   58  »' Sukeforth    v.    Lord,    87    Cal.,    399; 
Conn.,  542.  Mooney  v.  Davis,  75  Mich.,  188. 

«  Strand  v.  Griffith,  97  Fed.,  854.  ^^^  Reid  v.  Cowduroy,  79  la.,  169. 


DEPARTMENT  OF  LAW  137 

B  in  person.  ^^  Or,  if  A  make  a  false  statement  to  B  in  X's 
presence,  intending  that  X  shall  hear  and  act  upon  such 
statement,  A  is  guilty  of  fraud  toward  X.  ^^  A  statement 
made  to  the  general  public  may  amount  to  fraud.  For  in- 
stance, a  false  statement  in  the  advertisement  of  a  sale  may 
be  a  fraud.  ^^ 

(i)  Damage. — Fraudulent  representations  may  not 
result  in  injury,  and  in  such  case  legal  fraud  does  not  exist. 
False  representations  to  induce  one  to  do  a  legal  duty;  ^^  or 
to  pay  his  own  debt ;  ^^  or  to  sell  his  property  for  its  full 
value ;  ^"^  are  illustrations  of  this  condition.  It  is  clear  and 
logical  that  one  who  wishes  to  recover  damages  must  show 
damages,  but  most  courts  hold  that  false  representations, 
made  knowingly  with  intent  to  deceive,  causing  deception 
and  thereby  inducing  one  to  make  a  contract  that  he  would 
not  otherwise  have  made,  are  grounds  for  rescission  though 
no  actual  damage  follows.  ^^ 

(j)  Remedies. — Apart  from  contract,  a  person  injur- 
ed by  fraud  may  bring  an  action  at  common  law  for  deceit, 
and  is  entitled  to  such  damages  as  he  has  sustained.  Courts 
of  equity  will,  also  in  like  manner,  grant  relief  from  misrep- 
resentation or  fraud,  by  compelling  the  defendant  to  make 
good  the  loss  sustained  by  the  plaintiff.  These  rules  apply 
to  fraud  arising  ex  delicto,  "**  being  in  the  nature  of  a  tort. 
The  rules  with  regard  to  rights  in  cases  of  frau|.  arising 
ex  contracts,  ^^  are  particularly  effective  as  concerns  the  af- 
firmation or  avoidance  of  a  contract. 

Upon  discovery  of  the  fraud,  the  injured  party  may  (1) 
af&rm  the  contract  and  sue  for  the  damages  sustained;  or 
(2)  he  may  repudiate  the  contract  and  resist  an  action  upon 
it  at  law  or  in  equity.  In  case  of  repudiation,  the  party 
rescinding  may  in  equity,  obtain  a  cancellation  of  the  con- 
tract. 

As  a  general  rule,  the  right  to  recover  damages  is  de- 

^  Schofield  V.  Schofield,  77  Conn.,  1;  '^  Potter    v.    Lumber    Co.,    105    Wis., 

Hubbard  v.  Weare,  79   la.,   678.  25. 

'"Brown  v.  Brown,  62  Kan.,  666.  "Baker    v.    Maxwell,    99    Ala.,    558; 

"  Hadley  v.   Importing   Co.,   13   Ohio  MacLaren  v.     Cochran,     44  Minn., 

St.,  502.  255;  Harlow  v.  LaBrun,  151  N.  Y., 

'=  Deobold  v.   Opperman,   111,   N.   Y.,  278;  Williams  v.  Kerr,  152  Pa.  St., 

531.  560. 

»*  Brown  v.  Blunt,  72  Me.,  415.  =«  From  a  wrong. 

"'  From  a  contract. 


138       AMERICAN  EXTENSION  UNIVERSITY 

pendent  upon  restoration  of  the  money  or  goods  obtained 
under  the  contract.  On  the  other  hand,  the  right  to  avoid 
a  contract  is  limited  in  certain  ways.  It  is  true  that  a  per- 
son may  keep  the  contract  open  until  he  is  sued  upon  it,  and 
that  a  plea  of  fraud  then  set  up  is  a  sufficient  ground  for  re- 
cission;  but,  in  thus  postponing  his  repudiation,  the  courts 
may  decide  that  he  has  waived  his  right  to  take  advantage 
of  the  fraud  by  not  exercising  his  option  to  rescind;  or  by 
accepting  some  benefit  under  the  contract  after  he  has  be- 
come aware  of  the  fraud;  or  by  reason  of  the  fact  that  inno- 
cent third  parties  have  since  acquired  an  interest,  for  value, 
under  the  contract.  It  must  be  borne  in  mind  that  the  con- 
tract, until  the  defrauded  party  has  made  his  election,  is 
voidable  and  not  void.  If  the  right  to  avoid  is  lost,  the 
person  upon  whom  the  fraud  has  been  practised  must  resort 
to  his  action  for  damages  for  the  tort. 

§101.  Misrepresentation. — (a)  Distinguished  From 
Fraud  and  Mistake. — Misrepresentation  is  an  innocent 
false  statement  of  a  material  fact  made  by  one  party  to  a 
contract  to  the  other  party  or  parties,  with  the  intention  of 
influencing  the  latters'  action.  It  is  to  be  distinguished 
from  mistake  in  that  the  erroneous  belief  in  misrepresen- 
tation is  due  to  the  false  statement  of  one  of  the  parties  to 
the  contract,  while  in  mistake  such  erroneous  belief  must 
be  due  to  some  other  cause.  It  is  distinguished  from  fraud 
in  that  in  fraud  the  party  making  the  false  statement  has 
actual  or  constructive  knowledge  of  its  falsity  and  makes 
the  statement  with  intent  to  deceive  the  person  to  whom 
it  is  made.  Legal  misrepresentation  is  essentially  a  bona 
fide  misstatement.  Some  authorities  treat  it  as  in  part  mis- 
take and  in  part  fraud,  ^^  but  it  is  best  discussed  as  a  seper- 
ate  topic. 

Misrepresentation  is  often  confused  with  "condition" 
or  ** warranty"  in  a  transaction.  In  case  of  doubt,  the  test 
is: — Is  the  misstatement  a  part  of  the  contract?  If  so,  it  is 
a  condition  or  warranty,  and  its  falsity  does  not  affect  the 
formation  of  the  contract,  but  operates  to  discharge  the  in- 
jured party  from  his  obligation,  or  to  give  him  a  right  of 
action  based  on  the  contract. 

"Taylor  v.  Ford,  131  Cal.,  440. 


DEPARTMENT  OF  LAW  139 

(b)  Essentials. — To  constitute  misrepresentation,  the 
statement  must  be  one  of  fact ;  it  must  be  false ;  it  must  have 
been  believed  in  and  acted  upon  by  the  party  to  whom  it  is 
made;  and,  although  it  may  exist  in  the  ordinary  sense  of 
the  term,  it  has  no  legal  existence,  unless  it  is  a  misstate- 
ment of  a  material  fact. 

(c)  Matters  of  Opinion. — Mere  matters  of  opinion  or 
of  hearsay,  cannot  constitute  misrepresentation.  Thus, 
statements  as  to  the  opinion  of  the  value  of  certain  book  ac- 
counts, ^^  or  of  certain  property,  ^^  are  not  legal  misrepre- 
sentations. ^^ 

(d)  True  Statements — Knowledge  of  Facts. — It  is 
evident  that  a  true  statement  of  fact  is  not  a  misrepresen- 
tation. Also,  if  the  person  to  whom  the  representation  is 
made  is  informed  of  the  facts,  no  legal  misrepresentation 
exists.  *-  So  a  false  statement  made  after  the  transaction 
is  entered  into  cannot  be  legal  misrepresentation.  ^^  Nor 
is  a  false  statement  as  to  the  condition  of  a  business,  mis- 
representation, if  the  facts  in  question  are  shown  by  the 
books  of  the  business  and  the  party  to  whom  such  repre- 
sentations are  made  examines  such  books.  ^*  It  has  been 
held  that  misrepresentation  is  not  operative  if  both  par- 
ties have  an  equal  opportunity  to  know  the  truth.  ^^ 

(e)  Materiality  of  Facts  Stated. — Finally,  the  mis- 
representation, in  order  to  be  operative,  must  be  a  mis- 
statement of  a  material  fact.  For  example,  in  a  contract 
for  the  sale  of  realty,  a  representation  by  the  vendor  that 
the  area  of  the  tract  is  substantially  greater  than  it  really 
is,  is  ground  for  a  rescission  of  the  contract.  **^  On  the  other 
hand  misrepresentation  as  to  an  immaterial  fact  has  no 
legal  effect.  Thus  where  a  surety,  signing  a  note  as  an  ac- 
commodation, is  told  that  the  note  signed  by  him  is  a  renew- 
al of  a  former  note,  when  in  reality  it  is  to  cover  an  over- 
draft, legal  misrepresentation  does  not  exist.  "^^  Such  mis- 
statement does  not  affect  the  subject-matter  or  change  the 
surety's  liability  in  the  least. 

"Kenton  Ins.  Co.,  v.  Wiggington,  89  87  Wis.,  297. 

Ky.,  330.  "Colton  v.  Stanford,  82  Cal.,  351. 

"  Dooley  v.  Insurance  Co.  16  Wash.,  "  Mamlock  v.      Fairbanks,     46  Wis., 

155.  415. 

^^Wriglit    V.    Pliipps,    90    Fed.    556;  "  Newton  v.  Tolles,  66  N.  H.,  136. 

Patton  V.  Glatz,  87  Fed.  283.  "  Deposit  Bank  v.  Peak,  110  Ky.,  579. 
*^  Commercial  Bank  v.  Insurance  Co., 


140       AMERICAN  EXTENSION  UNIVERSITY 

(f )  Effect  in  General. — The  party  seeking  relief  must, 
by  reason  of  the  particular  misrepresentation,  have  receiv- 
ed some  right,  or  incurred  some  liability,  substantially  dif- 
ferent from  that  so  represented  to  him.  In  order  to  be  ef- 
fective as  grounds  for  avoiding  a  contract,  the  misrepresen- 
tation must  have  been  made  by  the  party  against  whom  re- 
lief is  sought,  or  by  some  one  acting  on  his  behalf. 

In  a  certain  class  of  contracts, — sometimes  referred  to 
as  uberrimae  fide,  ^^ — in  which,  from  their  nature,  or  from 
the  particular  circumstances,  one  party  must  wholly  rely 
upon  the  other  for  his  knowledge  of  the  facts,  there  is  an 
exception  to  the  general  rule  that  a  misrepresentation  not 
amounting  to  fraud,  and  not  constituting  a  material  fact, 
does  not  vitiate  the  contract.  Instances  of  such  contracts 
are  those  of  insurance,  contracts  between  attorney  and 
client,  principal  and  agent,  guardian  and  ward,  and,  to  a 
limited  extent,  contracts  for  the  sale  of  land,  and  contracts 
to  purchase  shares  in  stock  companies. 

(g)  Effect  in  Law. — At  common  law,  as  uninfluenced 
by  equity,  the  original  rule  seems  to  have  been  that  misrep- 
resentation which  did  not  affect  the  formation  of  the  con- 
tract, and  was  not  made  a  condition  thereof,  had  no  effect  on 
its  validity,  even  though  it  concerned  a  material  fact.  An 
action  of  deceit  could  not  be  brought  on  an  innocent  misrep- 
resentation, in  the  great  majority  of  jurisdictions.  ^^  Nor 
could  a  contract  induced  by  an  innocent  misrepresentation 
be  rescinded.  Many  jurisdictions  now  allow  this  form  of 
action  if  the  misrepresentation,  though  innocent,  are  mater- 
ial and  damaging.  ^^ 

(h)  Effect  in  Equity. — In  equity,  the  weight  of  au- 
thority is  that  rescission  may  be  allowed  to  one  who  is  in- 
duced to  enter  into  a  contract  by  misrepresentation  of  a 
material  fact.  ^^  Thus,  bona  fide  material  misrepresenta- 
tions as  to  the  value  of  collateral  security  of  a  note ;  ^-  or  as 
to  the  fact  of  land  being  oil  bearing;  ''^  or  as  to  the  amount 

"  "Of  the  utmost  good  faith."  Gunther  v.   Ulrich,   82   Wis.,  222. 

♦•  Dushane  v.      Benedict,   120     U.  S.,  "  Johnson  v.  Bnt,  93  Ala.,  160;  Jones 

630;  Nash.  v.  Trust  Co.,  163  Mass.,  v.  Foster,  175  111.,  459. 

574.  '-  Borders   v.      Kattleman,      142    111., 

••Totten  V.  Burhans,  91   Mich.,  495;  96. 

Bennett  v.  Judson,  21  N.  Y.,  238;  °»  Braunschweiger  v.  Waits,   179,  Pa. 

Loper  V.   Robinson,   54  Tex.,   510;  St.,  47. 


DEPARTMENT  OF  LAW  141 

of  debts  owing  by  the  vendee  who  seeks  credit;  ^^  are  each 
ground  for  rescission  in  equity. 

The  combined  effect  of  the  equitable  rule  allowing  re- 
scission for  a  material  misrepresentation,  and  the  common 
law  rule  which  treats  misrepresentation  as  a  fraud,  is  grad- 
ually establishing  a  doctrine  at  common  law  that  such  a  mis- 
representation is  ground  for  an  informal  rescission  at  law.  ^° 
Thus,  an  innocent  misrepresentation  as  to  the  amount  of 
timber  on  property  conveyed;  ^^  or  as  to  the  extent  of 
physical  injuries;  ^^  are  held  sufficient  to  enable  the  party 
misled  thereby,  to  avoid  the  contract  which  he  has  been 
so  induced  to  make.  So  far  as  the  remedy  is  concerned,  if 
the  false  statement  is  sufficient  to  avoid  the  contract,  it 
makes  little  difference  whether  it  is  a  case  of  misrepresen- 
tation or  of  fraud. 

§102.  Mistake. — (a)  In  General  and  Definitions. — 
It  must  be  borne  in  mind  that  this  subject  has  to  do  with 
mistake  of  intention,  and  not  mistake  of  expression,  which 
amounts  to  incorrect  construction.  In  the  latter  case,  the 
court  will  usually  correct  the  contract  providing  that  proof 
of  the  mistake  in  expressing  the  real  intention  of  the  par- 
ties to  the  contract,  is  clear  and  convincing.  Legal  mistake, 
contrary  to  legal  fraud,  renders  a  contract  void,  and  not 
voidable.  Mistake,  to  have  this  effect,  must  be  mutual,  both 
parties  must  have  equally  shared  therein,  or  there  must 
have  been  mistake  on  one  side  and  fraud  on  the  other. 

Mistake,  in  the  broad  legal  sense  of  the  term  is  "that 
result  of  ignorance  of  law  or  of  fact,  which  has  mislead  a 
person  to  commit  that  which,  if  he  had  not  been  in  error,  he 
would  not  have  done."  ^^  A  mistake  of  a  fact  is  an  uncon- 
scious ignorance,  or  forgetfulness,  of  the  existence  or  non- 
existence of  a  fact,  past  or  present,  material  to  the 
contract.  ^^ 

(b)  As  to  Subject  Matter. — Mistake  as  to  subject  mat- 
ter will  avoid  a  contract  when  the  subject-matter,  unknown 
to  the  parties,  did  not,  or  has  ceased  to,  exist;  or  when 
the  parties  confuse  the  identity  of  the  subject-matter;  or 

"Ernst  V.   Cohn,   62   S.  W.    (Tenn.,)  ^  McKinnon  v.  Vollmar,  75  Wis.,  82. 

186.  ^'Wilcox  V.   Railway,   111   Fed.,   435 

»  Ruff  V.  Jarrett,  94  HI.,  475;  Mooney  =*  Jeremy  Eq.  Juris.,  358. 

V.  Davis,  Mich.,  188.  ^  Pomroy  Eq.   Juris.,   §839. 


142       AMERICAN  EXTENSION  UNIVERSITY 

mistake,  mutually,  as  to  its  true  condition.  One  of  the  lead- 
ing English  cases  on  the  subject  of  a  non-existing  subject- 
matter  arose  out  of  a  sale  of  cargo  of  corn  which  was  sup- 
posed, by  the  parties  at  the  time  of  the  sale,  to  be  on  its  voy- 
age to  England,  but  which,  in  fact,  having  become  heated 
while  out  at  sea,  had  been  unloaded  and  sold.  It  was  held 
that  the  contract  was  void,  inasmuch  as  it  ''plainly  imported 
that  there  was  something  which  was  to  be  sold  at  the  time 
the  contract  was  made  and  something  to  be  purchased," 
whereas  the  object  of  the  sale  had  in  fact  ceased  to  exist.  ®® 

The  inducement  to  execute  the  contract  must  have  been 
such  that  ordinary  diUgence  could  not  discover  the  error.  "^ 
An  interesting  case  illustrative  of  a  mistake  as  to  the  nature 
of  the  subject-matter  is  where  the  defendant  sold  and 
delivered  to  the  plaintiff  a  thorough-bred  cow  for  the  sum 
of  $80,  both  parties  to  the  contract  supposing  the  cow  was 
barren.  Before  the  time  for  the  performance  of  the  con- 
tract by  delivery  of  the  cow  arrived,  the  defendant  discov- 
ered that  she  was  with  calf,  whereupon  he  rescinded  the  sale 
and  declined  to  deliver.  As  a  breeder  the  cow  was  worth 
from  $750  to  $1000.  Plaintiff  brought  a  suit  in  replevin  to 
get  possession  of  the  animal,  claiming  title  under  the  sale. 
The  court  held  that  the  right  of  rescission  was  properly  ex- 
ercised by  the  defendant,  and  that  the  mistake  or  misappre- 
hension of  the  parties  as  to  the  actual  condition  of  the  cow 
went  to  the  whole  substance  of  the  agreement.  ^^  In  cases 
in  which  one's  contract  is  to  supply  a  certain  article  abso- 
lutely, and  not  impliedly  conditional  upon  its  existence,  the 
rule  is  otherwise.  ^^ 

(c)  Ignorance  of  Law. — Mistake  of  law,  by  reason  of 
which  the  parties  did  not  understand  the  legal  effect  of  their 
contract  does  not  void  it.  Mistake  of  a  foreign  law,  how- 
ever, is  a  mistake  of  fact,  and  will  vitiate  the  contract.  ^^ 
Of  course,  in  cases  of  fraud,  or  of  violation  of  confidence, 

*Conturier  v.  Hastle,   5   H,  L.   Cas.,  Neb.,  247. 

673;    and   see,   Ketchum   v.    Catlln      "  Sherwood  v.  Walker,  33  N.  W.  Rep., 
21  Vt.,  191.  (Mich.,)    919. 


•'Glbbs  V.  Linabury,  22  Mich.,  479 
Cllne  V.  Guthrie,  42  Ind.,  236 
Walker  v.     Ebert,  2  9  Wis.,     194 


*"  Perkins  v.  Say,  3  Serg.  &  R.,  (Pa.,) 

327. 
"  Haven  v,  Foster.  9  Pick.,   (Mass.,) 


First  National  Bank  v.  Leerman,  5  112. 


DEPARTMENT  OF  LAW 


143 


even  though  coupled  with  a  mistake  of  law,  the  contract 
may  be  set  aside.  ^^ 

(d)  As  to  Identity  of  Party. — Honest  mistake  as  to 
the  person  with  whom  one  is  contracting  will  release  one 
from  such  contractual  obligations.  Justice  Cooley  once 
said:  "No  man  can  be  compelled  against  his  will  to  ac- 
cept another  contracting  party  in  place  of  the  one  he  has 
dealt  with,  even  though  a  contract  with  such  other  party 
may  be  equally  valuable,  and  in  its  results  exactly  the 
same."  ^^  This  mistake  is  often  brought  about  by  the  sub- 
stitution of  one  party  for  another  under  a  contract  without 
notice  to  the  real  party  in  interest.  *^^  Also  where  one  party, 
claiming  to  be  some  one  other  than  he  is,  procures  a  prom- 
ise, as  of  marriage;  or  obtains  a  contract  of  any  other  kind 
that  would  not  otherwise  have  been  given  him. 

(e)  Effect. — The  effect  of  mistake  is  to  render  the 
contract  void.  If  the  contract  is  executed  in  whole  or  in 
part  the  amount  paid,  or  the  other  consideration  given,  un- 
der it  may  be  recovered  where,  however,  the  mistake  is  the 
direct  result  of  fraud,  the  contract  is  rendered  voidable 
only.  In  the  case  of  executory  contracts,  the  mistaken 
party  may  repudiate  and  successfully  defend  an  action 
brought  upon  it.  These  rules  are  applicable  only  where 
the  mistake  is  such  as  to  effect  the  essential  elements  of 
the  contract.  Mistake  in  the  inducement — or  an  erroneous 
belief  as  to  a  collateral,  although  material,  fact  which  does 
not  affect  a  knowledge  of  the  existence  and  identity  of  the 
essential  elements  of  the  contract — not  due  to  any  state- 
ment made  by  the  adversary,  does  not  operate  as  a  grounds 
for  avoiding  the  contract.  For  this  class  of  mistake,  neith- 
er the  law  nor  equity  furnishes  any  relief.  ®^  It  may  seem 
difficult  to  draw  a  decided  or  strict  line  of  demarkation  be- 
tween mistake  in  the  inducement,  and  the  mistake  which 


Upton  V.  Tribelack  91  U.  S.,  45. 

Gregory  v.  Wendell,  40  Mich.,  443. 

Thus,  in  Boston  Ice  Company  v. 
Potter,  123  Mass.,  29,  the  defend- 
ant, who  had  bought  ice  of  the 
plaintiff,  ceased  to  take  more  upon 
termination  of  the  contract,  on  ac- 
count of  dissatisfaction,  and  con- 
tracted for  ice  with  another  com- 
pany. Later  on,  plaintiff  bought 
the  other  company's  business  and 


delivered  ice  to  the  defendant  with- 
out notifying  the  latter  of  the  sub- 
stitution until  after  the  delivery 
and  consumption  of  the  ice.  The 
court  held  that  there  was  no  priv- 
ity of  contract  between  plaintiff 
and  defendant  and  therefore  that 
the  action  to  collect  for  the  ice 
could  not  be  maintained. 
•*  Moore  v.  Scott.  47  Neb.,  346. 


144       AMERICAN  EXTENSION  UNIVERSITY 

will  justify  a  repudiation  of  the  contract.  It  may  be  safely 
said  that  the  courts  are  somewhat  divided  on  this  point  as 
applied  to  similar  conditions  ot  fact,  many  courts  consider- 
ing extreme  cases  of  facts  in  the  inducement,  as  material 
and  essential  elements  of  the  agreement.  ^^ 

A  party  who  is  entitled  to  avoid  a  contract  on  the 
ground  of  mistake  must  rescind  at  law,  or  seek  his  re- 
lief in  equity. 

§103.  Undue  Influence. — (a)  Nature. — Undue  in- 
fluence, as  regards  the  formation  of  a  contract,  is  defined  as 
an  unconscientious  use  of  the  power  arising  out  of  circum- 
stances and  conditions  of  the  contracting  parties  which 
raises  the  presumption  of  fraud.  Undue  influence  may  con- 
sist in  the  use,  by  one  in  whom  confidence  is  reposed  by  an-^ 
other,  or  who  holds  a  real  or  apparent  authority  over  him,  of 
such  confidence  or  authority  for  the  purpose  of  obtaining 
an  unfair  advantage  over  him,  ^^  by  taking  advantage  of  an- 
other's weakness  of  mind;  ^^  or  in  taking  a  grossly  oppi^es- 
sive  and  unfair  advantage  of  another's  necessities  or 
distress.  "^^ 

(b)  Effect  and  Remedy. — ^When  the  relative  position 
of  the  parties  is  such  as  to  raise  the  presumption  of  undue 
influence,  a  contract  so  made  cannot  stand  unless  the  person 
claiming  the  benefit  of  the  contract  can  rebut  the  presump- 
tion of  said  influence  by  contrary  evidence,  proving*  the 
transaction  to  have  been  fair  and  reasonable.  "^^ 

The  rules  respecting  the  right  to  rescind  contracts  en- 
tered into  under  duress,  or  undue  influence,  follow  the  rules 
which  apply  to  fraud,  with  the  qualifications,  however,  that, 
unless  it  is  clear  that  the  freedom  of  the  injured  party  has 
been  restored;  or  that  the  will  of  the  injured  party  is  re- 
lieved from  the  dominant  influence  under  which  it  has  act- 
ed; or  that  the  imperfect  knowledge  with  which  he  entered 
into  the  contract  is  supplemented  by  the  fullest  assistance 
and  information;  an  affirmance  of  the  agreement,  by  such 
party,  will  not  be  allowed  to  bind  him. 

•"Page  on  Contracts,   §156.  "  Bigelow  on  Frauds,  p.  259. 

'"Brock  V.  Barnes  40  Barb.   (N.  Y.,)  "  Schofield  v.  Walker,  58    Mich.,    96 

521.  Wise  V.  Foote,  81  Ky.,  10. 

"Tracy  v.  Sackett  18  Ohio.  St.,  58. 


DEPARTMENT  OF  LAW  145 

CHAPTER  XIII. 

PROOF  OF  COXTRACTS  ,    , 

§104.  In  General. 
105.  Methods  of  Proof. 

(a)  Sealed   Instruments   .  ,        ' 

(b)  Parol   Evidence. 

(c)  To    Prove    Contract    Invalid. 

(d)  As  to  Contract  Terms  and  Parties. 

(e)  As  to  Custom. 

(f)  To  Show  Mistake. 

§104.  In  General. — The  proof  of  a  contract  involves 
the  circumstances  and  intentions  under  which  it  was  made. 
These  circumstances  and  intentions  are  questions  of  fact  for 
the  jury,  or  for  the  court  when  it  sits  as  judge  of  the  facts. 

The  general  rules  governing  this  subject  will  be  treated 
under  the  subject  of  Evidence,  but  it  is  well,  now,  to  con- 
sider some  elementary  rules  as  applied  to  the  proof  of  the 
facts  of  a  contract  when  the  terms  are  in  dispute.  The  fact 
of  the  existence  of  a  contract  is  governed  by  the  same 
rules. 

§105.  Methods  of  Proof. — Contracts  under  seal  are 
proved  by  evidence  of  their  sealing  and  delivery.  Con- 
tracts by  word  of  mouth,  verbal  contracts,  or  in  writing,  are 
proved  by  parol  evidence  or  those  written  evidences  pro- 
duced in  court  which  the  respective  parties  offer  to  support 
their  contentions.  The  rules  applicable  to  oral  contracts 
are  governed  by  general  laws  of  evidence  and  will  not  be 
here  considered. 

(a)  Sealed  Instruments. — Contracts  under  seal  are 
said  to  prove  themselves.  By  that  is  meant  that  once  the 
fact  of  the  sealing  of  a  contract  being  established,  and  its 
delivery  to  the  other  party  proven,  no  farther  evidence  as 
to  the  making  of  the  contract  is  necessary.  In  other  words, 
the  fact  of  a  seal  on  a  contract  legally  and  conclusively,  of 
itself,  proves  the  contract  upon  the  fact  of  the  sealing  being 
shown.  Contracts  under  seal  were  formerly  attested  by  the 
signature  of  two  or  more  witnesses  to  the  execution  of  the 
contract.  When  these  witnesses  could  not  be  produced  at 
the  trial,  proof  of  their  handwriting  was  sufficient.  In  most 
states  attesting  witnesses,  except  in  particular  cases,  as  in 
wills,  are  not  now  required. 


146       AMERICAN  EXTENSION  UNIVERSITY 

(b)  Parol  Evidence. — Parol  or  oral  evidence  is  ad- 
missible in  proving  a  simple  and  unsealed  written  contract, 
(1)  to  show  that  the  signature  thereto  is  that  of  the  person 
sought  to  be  charged,  or  that  the  defendant  made  the  con- 
tract; (2)  to  supplement  the  writing  constituting  part  of  the 
contract;  or  (3)  to  connect  several  separate  writings  which 
go  to  make  up  the  whole  contract.  In  ordinary  contracts 
parol  evidence  must  necessarily  be  admitted  to  prove  the 
Identity  of  the  parties.  In  cases  in  which  the  offer  was  in 
writing,  and  the  acceptance  was  by  parol,  proof  of  acts  con- 
stituting acceptance  must  necessarily  be  by  parol  evidence. 
Such  is  the  case  where  a  written  offer  was  made  to  buy 
goods  with  instructions  to  ship  if  the  offer  is  accepted. 
The  seller  completes  the  contract  by  shipping  the  goods, 
and  this  fact  may  be  proved  by  parol  evidence. 

(c)  Same. — To  Prove  a  Contract  Invalid. — Incapac- 
ity, such  as  minority,  insanity,  etc.,  mistake,  fraud,  want  of 
genuine  consent,  and  the  like,  in  the  making  of  a  written 
contract,  may  be  shown  by  parol  proof.  In  the  case  of  a  sim- 
ple contract,  where  only  the  promise  appears  in  writing,  it 
may  be  shown  by  oral  testimony  that  there  was  no  consider- 
ation therefor.  In  the  case  of  Rhine  v.  Allen,  ^  the  plaintiff 
executed  a  deed  to  certain  mining  land  in  favor  of  the  defen- 
dant and  others,  in  which  the  mutual  consideration  was  ex- 
pressed as  paid.  In  reality,  the  defendant  had  not  paid 
anything,  and  plaintiff  brought  action  to  collect  the  con- 
sideration for  the  conveyance,  which  the  defendant  had  re- 
pudiated. The  court  allowed  the  plaintiff  to  show  by  parol 
evidence  that  the  consideration  from  the  defendant  recited 
in  the  deed  as  paid,  had  not  in  fact  been  paid.  The  defend- 
ant, in  contradiction  of  the  plaintiff's  contention,  was  al- 
lowed to  show  by  oral  testimony  that  there  was  a  condi- 
tion coupled  with  the  consideration  to  the  effect  that  he 
might  work  the  mine  a  year,  and  if  he  chose  to  make  an  ab- 
solute purchase  within  that  time,  for  the  consideration  as 
agreed  upon,  he  might  do  so.  The  preponderance  of  evi- 
dence of  this  collateral  fact  sustained  the  defense. 

(d)  Same — As  To  Contract- Terms  and  Parties — 
Parol  evidence  is  also  admissible  to  explain  the  terms  of  a 

*36Cal.,  362. 


DEPARTMENT  OF  LAW  147 

contract;  and  to  identify  the  contracting  parties.  Explana- 
tion of  the  terms  of  a  contract  may  amount  merely  to  evi- 
dence of  the  identity  of  the  parties  thereto,  as  where  two 
persons  have  the  same  name,  or  where  an  agent  has  con- 
tracted in  his  own  name  but  on  behalf  of  a  principal  whose 
name  or  whose  existence  he  omitted  to  disclose.  ^  But  the 
names  of  the  parties  cannot  be  changed  or  contradicted  by 
parol  evidence,  nor  can  a  person  show  by  parol  testimony 
that  he  acted  merely  as  agent  for  another  when  he  contract- 
ed in  his  own  name.  ^  Other  matters  such  as  a  description 
of  the  subject  matter;  the  extent  of  the  liability  intended; 
and  the  limitation  of  the  meaning  of  certain  words;  may 
also  be  thus  proved,  when  they  are  not  definitely  shown  in 
the  contract.  The  uncertainty  and  indefiniteness  of  the 
contract,  to  allow  the  admission  of  such  evidence,  must  be 
sufficient  to  render  the  contract  unintelligible  or  ambiguous 
without  such  oral  proof.  ^ 

(e)  Same — As  to  Custom. — Parol  evidence  of  custom 
in  a  particular  locality,  or  of  a  usage  of  trade,  is  admissible 
to  explain  written  contracts.  The  custom  may  concern  a 
mode  of  living,  or  pertain  to  agriculture,  commerce,  or  any 
of  the  numerous  subject-matters  of  contract.  The  theory 
of  the  admissibility  of  oral  evidence  of  custom  or  usage,  like 
the  theory  allowing  the  admission  of  parol  evidence  as  ex- 
planation, is  that  the  parties  did  not  intend  to  put  in  writing 
the  whole  of  the  contract  by  which  they  were  to  be  bound, 
but  contracted  with  reference  to  what  was  generally  under- 
stood by  persons  in  their  particular  location  or  line  of 
business. 

A  custom  or  usage  to  be  admissible  as  proof  must  have 
been  one  that  was  established  at  the  date  of  the  contract. 
Furthermore  it  must  be  general,  uniform,  certain,  con- 
tinued, acquiesced  in,  consistent  with  the  law,  and 
reasonable. 

(f )  Same — To  Show  Mistake. — The  admission  of  pa- 
rol evidence  to  prove  the  intention  of  parties  in  cases  where 
by  mistake,  the  contract  does  not  express  the  true  intention. 

» Martin  v.  Smith,  65  Miss.,  1;  Wake-  460. 

field  V.  Brown,  38  Minn.,  361.  *  Sanderson  v.  Piper,  5  Bing  (N.  C), 
'Dexter  v.  Ohlander,  93    Ala.,    441;  425. 

Brigham    v.    Herrick,    173    Mass., 


148       AMERICAN  EXTENSION  UNIVERSITY 

necessitates  the  application  of  equitable  remedies,  which 
will  be  more  fully  discussed  when  we  take  up  the  subject 
of  Equity. 

We  may  say  now  that  equity  admits  such  evidence  in 
many  cases  where  courts  of  purely  common-law  jurisdic- 
tion would  apply  the  strict  rules  of  evidence,  and  thus 
fail  to  afford  full  relief.  In  all  cases  where  a  contract  is 
alleged  not  to  express  the  actual  agreement,  because  of  a 
mistake  of  the  parties  thereto,  the  mistake  must  have  been 
mutual,  and  the  evidence  thereof  must  be  clear  and  con-i 
vincing.  Or,  in  other  cases,  there  must  have  been  some 
fraud  on  the  part  of  the  party  to  the  contract,  other  than 
the  one  seeking  to  reform  it.  In  case  of  fraud  in  procur- 
ing the  execution  of  a  contract,  the  contract  is  void.  The 
proper  remedy  in  such  cases  is  an  action  at  law  for  dam- 
ages; but,  when  the  fraud  consists  in  an  unfair  knowledge 
by  one  of  the  parties,  after  the  execution  of  the  contract, 
whereby  he  will  profit  by  the  other's  mistake,  equity  will 
rectify  the  mistake,  even  though  it  is  not  mutual.  ^ 

"Moffet    H.     &     C.     Co.     V.    City    of  Rochester,  178  U.  S.,  373. 


QUIZZER. 

ACTIONS   AND    DEFENCES. 

l-§96.  When  does  a  right  of  action  on  a  contract  accrue — 
state  fully? 

2- §97.  What  can  you  say  as  to  a  party  having  a  choice  of 
remedies  in  certain  cases  arising  from  con- 
tracts ? 

3-  Can  a  party  under  such  circumstances  pursue  two 

actions  at  one  time  upon  the  same  cause  of  ac- 
tion? 

4-§98.  Upon  what  must  the  defence  to  an  action  on  con- 
tract be  based?  Name  several  items  of  possible 
defence  to  such  actions. 

5- §99      Define  duress  and  name  its  kinds. 

6- (a)  What  is  the  effect  upon  a  contract,  or  duress  exer- 
cised upon  its  execution? 

7-  Name  the  two  kinds  of  duress  of  the  person. 


DEPARTMENT  OF  LAW  149 

8-(b)      Define  duress  of  person. 

9-  From  what  can  duress  arise? 

10-  Is  one  legally  under  duress  where  his  imprison- 

ment is  legal  but  the  process  was  maliciously 
issued? 

11-  Upon  whom  must  the  act  of  duress  be  imposed  in 

order  for  it  to  be  available  in  defence  of  a  con- 
tract? 

12-  Who  must  perform  the  act  of  duress  in  order  for  it 

to  be  so  available  ? 

13-  Is  a  contract  entered  into  in  order  to  relieve  a 

third   person   from    duress    voidable    on    that 
ground? 
14- (c)      Define  duress  of  goods. 

15-  When  does  such  a  duress  exist  ? 

16-  Is  this  form  of  duress  ground  for  avoiding  a  con- 

tract? 

17-  What  is  the  effect  upon  a  contract  given  to  recover 

goods  detained  without  right  ? 

18-  Can  money  paid  for  the  release  of  goods  from  du- 

ress be  recovered? 

19-  What  must  the  party  pleading  duress  show,  to 

make  such  defence  effective  ? 
20-§100    Define  fraud. 
21- (a)     What  distinction  in  the  definition  of  fraud  did  the 

common  law  and  the  equity  courts  make. 
22- (b)      How  does  fraud  differ  from  mistake? 

23-  How  does  fraud  differ  from  misrepresentation? 

24-  Is  the  non-disclosure  of  material  facts  fraud? 

25-  Is  mere  silence  of  fact,  a  basis  for  invalidating  a 

contract  ? 
26- (c)       Name  the  eight  essential  features  of  fraud. 

27-  How  does  fraud,  in  the  actual  making  of  a  con- 

tract, affect  it  ? 

28-  Can  a  void  contract  be  rescinded — and  why? 

29-  Name  illustrations  of  common  forms  of  fraud  in 

contracts  which  render  same  void. 
30- (d)      Is  the  form  in  which  a  false  representation  is  made 
material  as  affecting  the  validity  of  a  contract? 


150       AMERICAN  EXTENSION  UNIVERSITY 

31-  In  what  may  a  false  representation  consist — state 

fuUy? 

32-  Is  there  any  legal  difference  between  fraud  in  fact 

and  fraud  in  law"? 

33-  Is  disclosure  of  facts  incumbent  in  contracts  of 

sale? 

34-  Do  oral  misrepresentations  in  contracts,  coming 

under  the  statute  of  frauds  constitute  grounds 
for  invalidating  the  contract"? 
35- (e)      WiU  mere  expressions  of  opinion,  belief,  or  expec- 
tation, invalidate  a  contract  ? 

36-  Will  representations  of  an  intention  amount  to 

a  fraud? 

37-  Give  several  illustrations  of  the  application  of  the 

principles  covered  by  the  last  two  questions. 
38- (f)       What  is  essential  in  false  representations,  to  en- 
able one  to  rescind  a  contract  or  maintain  an  ac- 
tion for  deceit  in  procuring  same  ? 

39-  Can  one  who  did  not  know  that  the  statements 

made  were  false  or  one  who  disbelieves  such 
statements  as  made,  take  advantage  of  same"? 

40-  Is  it  necessary  that  the  false  representations  be 

the  sole  motive  in  entering  into  a  contract  to 
avoid  same  for  that  cause  ? 

41-  What  duty  of  investigation  does  the  law  impose 

upon  one  entering  into  contracts'? 
42- (g)      Is  it  essential  that  there  be  an  intention  to  de- 
ceive in  making  a  false  representation? 
43-  What  is  sufficient  in  making  false  representations, 

to  work  an  invalidation  of  a  contract? 
44- (h)      WiU  false  representations  made  to  a  third  party 

give  grounds  for  invalidating  a  contract — if  so, 

when? 
45-  Can  a  statement  to  the  general  public  amount  to 

a  fraud  on  any  individual? 
46- (i)       Does  legal  fraud  exist  where  no  injury  results 

from  fraudulent  representations? 
47-  Is  it  a  legal  fraud  to  make  false  representations  to 

induce  one  to  perform  a  legal  duty? 


DEPARTMENT  OF  LAW  151 

48-  When  will  false  representations,  followed  by  no 

actual  damage,  give  basis  for  rescinding  a  con- 
tract? 

49-(j)  May  a  person  injured  by  fraud,  apart  from  con- 
tract, maintain  an  action  for  damages  therefor — 
if  so,  under  what  form  of  action? 

50-  Will  courts  of  equity  afford  relief  for  misrepresen- 

tation— if  so,  how? 

51-  What  choice  of  action  has  an  injured  party  upon 

discovery  of  fraud? 

52-  Upon  what  is  the  right  to  recover  damages  de- 

pendent as  a  general  rule  ? 

53-  How  is  the  right  to  avoid  a  contract  limited — state 

fully? 

54-  Are  contracts  secured  through  misrepresentations 

void  or  voidable? 

55-§101  Define  misrepresentation,  and  distinguish  it 
(a)         from  fraud  and  mistake  ? 

56-  How  is  misrepresentation  confused  with,  and  t(5 

be  distinguished  from,  ''condition"  or  "war- 
ranty" in  a  contract? 

57- (b)  What  is  essential  to  constitute  legal  misrepresen- 
tation? 

58- (c)  What  matters  of  opinion  or  of  hearsay  constitute 
misrepresentation  ? 

59- (d)  Is  a  true  statement  of  fact  ever  a  misrepresenta- 
tion? 

60-  Is  there  a  legal  misrepresentation  where  the  party 

to  whom  it  is  made  knows  the  facts? 

61-  Is  a  misrepresentation,  made  after  the  transaction 

is  entered  into,  legally  a  false  statement? 

62-  Is  misrepresentation  operative  where  both  parties 

have  equal  opportunity  to  know  the  truth? 

63- (e)  What  is  finally  essential  to  make  a  mis-statement 
legally  operative  ? 

64-  How  do  misrepresentations  as  to  an  immaterial 

fact  effect  a  contract? 

65- (f)  What  is  essential  in  order  to  render  misrepresen- 
tations an  effective  ground  for  avoiding  a  con- 
tract? 


152       AMERICAN  EXTENSION  UNIVERSITY 

66-  What  class  of  contracts — and  for  what  reason — 

are  an  exception  to  the  general  rule  placing  ob- 
ligations not  to  misrepresent  concerning  same? 

67- (h)  Can  one,  in  equity,  rescind  a  contract  which  he 
made  by  misrepresentation  of  the  other  party? 

68-  What  innocent  misrepresentations  are  held  suffi- 

cient to  enable  the  party  misled  thereby  to 
avoid  the  contract  ? 

69- §102  What  kind  of  mistake  does  the  law  take  cogniz- 
(a)        ance  of? 

70-  How  will  courts  correct  mistake  of  intention,  and 

how  mistakes  of  expression,  in  a  contract? 

71-  How  does  legal  mistake  affect  a  contract  ? 

72-  What  is  essential  in  mistakes  for  it  to  have  this 

effect? 

73-  Define  mistake. 

74-  Define  mistake  of  fact. 

75- (b)      When  will  mistake  as  to  the  subject  matter  pf  a 

contract  avoid  same — illustrate? 
76- (c)      Does  mistake  of  law  avoid  a  contract? 

77-  Does  mistake  of  a  foreign  law  avoid  a  contract? 

78-  How  does  fraud,  or  violation  of  confidence,  coupled 

with  mistake,  affect  a  contract  ? 

79- (d)  Will  honest  mistake  as  to  the  identity  of  the  other 
party  to  a  contract  give  grounds  for  rescinding 
same — and  why? 

80- (e)  Where  a  contract  is  executed  fully,  or  in  part,  be- 
fore mistake  is  discovered,  can  the  consideration 
given  therefor  be  recovered? 

81-  What  is  the  effect  on  a  contract  where  the  mistake 

is  the  direct  result  of  fraud? 

82-  What  legal  rights  has  a  mistaken  party  in  an  exe- 

cutory contract  ? 

83-  Does  mistake  as  to  collateral  facts  furnish  a  basis 

for  rescinding  a  contract? 

84-  What  choice  of  remedies  must  one  make  who  is  en- 

titled to  avoid  a  contract  on  the  ground  of  mis- 
take? 

85-§103    Define  undue  influence. 

86- (a)     Of  what  may  undue  influence  consist — state  fully? 


DEPARTMENT  OF  LAW  145 

CHAPTER  XIII. 

PROOF  OF  CONTRACTS 

§104.   In  General. 
105.   Methods  of  Proof. 

(a)  Sealed   Instruments  . 

(b)  Parol   Evidence. 

(c)  To    Prove    Contract    Invalid. 

(d)  As  to  Contract  Terms  and  Parties. 

(e)  As  to  Custom. 

(f)  To  Show  Mistake. 

§104.  In  General. — The  proof  of  a  contract  involves 
the  circumstances  and  intentions  under  which  it  was  made. 
These  circumstances  and  intentions  are  questions  of  fact  for 
the  jury,  or  for  the  court  when  it  sits  as  judge  of  the  facts. 

The  general  rules  governing  this  subject  will  be  treated 
under  the  subject  of  Evidence,  but  it  is  well,  now,  to  con- 
sider some  elementary  rules  as  applied  to  the  proof  of  the 
facts  of  a  contract  when  the  terms  are  in  dispute.  The  fact 
of  the  existence  of  a  contract  is  governed  by  the  same 
rules. 

§105.  Methods  of  Proof. — Contracts  under  seal  are 
proved  by  evidence  of  their  sealing  and  delivery.  Con- 
tracts by  word  of  mouth,  verbal  contracts,  or  in  writing,  are 
proved  by  parol  evidence  or  those  written  evidences  pro- 
duced in  court  which  the  respective  parties  offer  to  support 
their  contentions.  The  rules  applicable  to  oral  contracts 
are  governed  by  general  laws  of  evidence  and  will  not  be 
here  considered. 

(a)  Sealed  Instruments. — Contracts  under  seal  are 
said  to  prove  themselves.  By  that  is  meant  that  once  the 
fact  of  the  sealing  of  a  contract  being  established,  and  its 
delivery  to  the  other  party  proven,  no  farther  evidence  as 
to  the  making  of  the  contract  is  necessary.  In  other  words, 
the  fact  of  a  seal  on  a  contract  legally  and  conclusively,  of 
itself,  proves  the  contract  upon  the  fact  of  the  sealing  being 
shown.  Contracts  under  seal  were  formerly  attested  by  the 
signature  of  two  or  more  witnesses  to  the  execution  of  the 
contract.  When  these  witnesses  could  not  be  produced  at 
the  trial,  proof  of  their  handwriting  was  sufficient.  In  most 
states  attesting  witnesses,  except  in  particular  cases,  as  in 
wills,  are  not  now  required. 


146       AMERICAN  EXTENSION  UNIVERSITY 

(b)  Parol  Evidence. — Parol  or  oral  evidence  is  ad- 
missible in  proving  a  simple  and  unsealed  written  contract, 
(1)  to  show  that  the  signature  thereto  is  that  of  the  person 
sought  to  be  charged,  or  that  the  defendant  made  the  con- 
tract; (2)  to  supplement  the  writing  constituting  part  of  the 
contract;  or  (3)  to  connect  several  separate  writings  which 
go  to  make  up  the  whole  contract.  In  ordinary  contracts 
parol  evidence  must  necessarily  be  admitted  to  prove  the 
identity  of  the  parties.  In  cases  in  which  the  offer  was  in 
writing,  and  the  acceptance  was  by  parol,  proof  of  acts  con- 
stituting acceptance  must  necessarily  be  by  parol  evidence. 
Such  is  the  case  where  a  written  offer  was  made  to  buy 
goods  with  instructions  to  ship  if  the  offer  is  accepted. 
The  seller  completes  the  contract  by  shipping  the  goods, 
and  this  fact  may  be  proved  by  parol  evidence. 

(c)  Same. — To  Prove  a  Contract  Invalid. — Incapac- 
ity, such  as  minority,  insanity,  etc.,  mistake,  fraud,  want  of 
genuine  consent,  and  the  like,  in  the  making  of  a  written 
contract,  may  be  shown  by  parol  proof.  In  the  case  of  a  sim- 
ple contract,  where  only  the  promise  appears  in  writing,  it 
may  be  shown  by  oral  testimony  that  there  was  no  consider- 
ation therefor.  In  the  case  of  Rhine  v.  Allen,  ^  the  plaintiff 
executed  a  deed  to  certain  mining  land  in  favor  of  the  defen- 
dant and  others,  in  which  the  mutual  consideration  was  ex- 
pressed as  paid.  In  reality,  the  defendant  had  not  paid 
anything,  and  plaintiff  brought  action  to  collect  the  con- 
sideration for  the  conveyance,  which  the  defendant  had  re- 
pudiated. The  court  allowed  the  plaintiff  to  show  by  parol 
evidence  that  the  consideration  from  the  defendant  recited 
in  the  deed  as  paid,  had  not  in  fact  been  paid.  The  defend- 
ant, in  contradiction  of  the  plaintiff's  contention,  was  al- 
lowed to  show  by  oral  testimony  that  there  was  a  condi- 
tion coupled  with  the  consideration  to  the  effect  that  he 
might  work  the  mine  a  year,  and  if  he  chose  to  make  an  ab- 
solute purchase  within  that  time,  for  the  consideration  as 
agreed  upon,  he  might  do  so.  The  preponderance  of  evi- 
dence of  this  collateral  fact  sustained  the  defense. 

(d)  Same — As  To  Contract-Terms  and  Parties — 
Parol  evidence  is  also  admissible  to  explain  the  terms  of  a 

»36  Cal..  362. 


DEPARTMENT  OF  LAW  147 

contract;  and  to  identify  the  contracting  parties.  Explana- 
tion of  the  terms  of  a  contract  may  amount  merely  to  evi- 
dence of  the  identity  of  the  parties  thereto,  as  where  two 
persons  have  the  same  name,  or  where  an  agent  has  con- 
tracted in  his  own  name  but  on  behalf  of  a  principal  whose 
name  or  whose  existence  he  omitted  to  disclose. "  But  the 
names  of  the  parties  cannot  be  changed  or  contradicted  by 
parol  evidence,  nor  can  a  person  show  by  parol  testimony 
that  he  acted  merely  as  agent  for  another  when  he  contract- 
ed in  his  own  name.  ^  Other  matters  such  as  a  description 
of  the  subject  matter;  the  extent  of  the  liability  intended; 
and  the  limitation  of  the  meaning  of  certain  words;  may 
also  be  thus  proved,  when  they  are  not  definitely  shown  in 
the  contract.  The  uncertainty  and  indefiniteness  of  the 
contract,  to  allow  the  admission  of  such  evidence,  must  be 
sufficient  to  render  the  contract  unintelligible  or  ambiguous 
without  such  oral  proof.  * 

(e)  Same — As  to  Custom. — Parol  evidence  of  custom 
in  a  particular  locality,  or  of  a  usage  of  trade,  is  admissible 
to  explain  written  contracts.  The  custom  may  concern  a 
mode  of  living,  or  pertain  to  agriculture,  commerce,  or  any 
of  the  numerous  subject-matters  of  contract.  The  theory 
of  the  admissibility  of  oral  evidence  of  custom  or  usage,  like 
the  theory  allowing  the  admission  of  parol  evidence  as  ex- 
planation, is  that  the  parties  did  not  intend  to  put  in  writing 
the  whole  of  the  contract  by  which  they  were  to  be  bound, 
but  contracted  with  reference  to  what  was  generally  under- 
stood by  persons  in  their  particular  location  or  line  of 
business. 

A  custom  or  usage  to  be  admissible  as  proof  must  have 
been  one  that  was  estabhshed  at  the  date  of  the  contract. 
Furthermore  it  must  be  general,  uniform,  certain,  con- 
tinued, acquiesced  in,  consistent  with  the  law,  and 
reasonable. 

(f )  Same — To  Show  Mistake. — The  admission  of  pa- 
rol evidence  to  prove  the  intention  of  parties  in  cases  where 
by  mistake,  the  contract  does  not  express  the  true  intention. 

•Martin  v.  Smith,  65  Miss.,  1;  Wake-  460. 

field  V.  Brown,  38  Minn.,  361.  *  Sanderson  v.  Piper,  5  Bing  (N.  C), 
'Dexter  v.  Ohlander,  93    Ala.,    441;  425. 

Brigham    v.    Herrick,    173    Mass., 


148       AMERICAN  EXTENSION  UNIVERSITY 

necessitates  the  application  of  equitable  remedies,  which 
will  be  more  fully  discussed  when  we  take  up  the  subject 
of  Equity. 

"We  may  say  now  that  equity  admits  such  evidence  in 
many  cases  where  courts  of  purely  common-law  jurisdic- 
tion would  apply  the  strict  rules  of  evidence,  and  thus 
fail  to  afford  full  relief.  In  all  cases  where  a  contract  is 
alleged  not  to  express  the  actual  agreement,  because  of  a 
mistake  of  the  parties  thereto,  the  mistake  must  have  been 
mutual,  and  the  evidence  thereof  must  be  clear  and  con-, 
vincing.  Or,  in  other  cases,  there  must  have  been  some 
fraud  on  the  part  of  the  party  to  the  contract,  other  than 
the  one  seeking  to  reform  it.  In  case  of  fraud  in  procur- 
ing the  execution  of  a  contract,  the  contract  is  void.  The 
proper  remedy  in  such  cases  is  an  action  at  law  for  dam- 
ages; but,  when  the  fraud  consists  in  an  unfair  knowledge 
by  one  of  the  parties,  after  the  execution  of  the  contract, 
whereby  he  will  profit  by  the  other's  mistake,  equity  will 
rectify  the  mistake,  even  though  it  is  not  mutual.  ^ 

"Moffet    H.     &     C.     Co.    V.     City    of  Rochester,  178  U.  S.,  373. 


QUIZZER. 

ACTIONS    AND   DEFENCES. 

l-§96.  When  does  a  right  of  action  on  a  contract  accrue — 
state  fully? 

2-§97.  What  can  you  say  as  to  a  party  having  a  choice  of 
remedies  in  certain  cases  arising  from  con- 
tracts'? 

3-  Can  a  party  under  such  circumstances  pursue  two 

actions  at  one  time  upon  the  same  cause  of  ac- 
tion? 

4- §98.  Upon  what  must  the  defence  to  an  action  on  con- 
tract be  based?  Name  several  items  of  possible 
defence  to  such  actions. 

5-§99      Define  duress  and  name  its  kinds. 

6- (a)  What  is  the  effect  upon  a  contract,  or  duress  exer- 
cised upon  its  execution? 

7-  Name  the  two  kinds  of  duress  of  the  person. 


DEPARTMENT  OF  LAW  149 

8-(b)      Define  duress  of  person. 

9-  From  what  can  duress  arise  ?  • 

10-  Is  one  legally  under  duress  where  his  imprison- 

ment is  legal  but  the  process  was  maliciously 
issued? 

11-  Upon  whom  must  the  act  of  duress  be  imposed  in 

order  for  it  to  be  available  in  defence  of  a  con- 
tract? 

12-  Who  must  perform  the  act  of  duress  in  order  for  it 

to  be  so  available  ? 

13-  Is  a  contract  entered  into  in  order  to  relieve  a 

third   person    from    duress    voidable    on    that 
ground? 
14- (c)      Define  duress  of  goods. 

15-  When  does  such  a  duress  exist  ? 

16-  Is  this  form  of  duress  ground  for  avoiding  a  con- 

tract? 

17-  What  is  the  effect  upon  a  contract  given  to  recover 

goods  detained  without  right  ? 

18-  Can  money  paid  for  the  release  of  goods  from  du- 

ress be  recovered? 

19-  What  must  the  party  pleading  duress  show,  to 

make  such  defence  effective  ? 
20-§100    Define  fraud. 
21- (a)     What  distinction  in  the  definition  of  fraud  did  the 

common  law  and  the  equity  courts  make. 
22- (b)      How  does  fraud  differ  from  mistake? 

23-  How  does  fraud  differ  from  misrepresentation? 

24-  Is  the  non-disclosure  of  material  facts  fraud? 

25-  Is  mere  silence  of  fact,  a  basis  for  invalidating  a 

contract  ? 
26- (c)       Name  the  eight  essential  features  of  fraud. 

27-  How  does  fraud,  in  the  actual  making  of  a  con- 

tract, affect  it  ? 

28-  Can  a  void  contract  be  rescinded — and  why? 

29-  Name  illustrations  of  common  forms  of  fraud  in 

contracts  which  render  same  void. 
30- (d)      Is  the  form  in  which  a  false  representation  is  made 
material  as  affecting  the  validity  of  a  contract? 


150       AMERICAN  EXTENSION  UNIVERSITY 

31-  In  what  may  a  false  representation  consist — state 

fuUy? 

32-  Is  there  any  legal  difference  between  fraud  in  fact 

and  fraud  in  law? 

33-  Is  disclosure  of  facts  incumbent  in  contracts  of 

sale? 

34-  Do  oral  misrepresentations  in  contracts,  coming 

under  the  statute  of  frauds  constitute  grounds 
for  invalidating  the  contract? 
35- (e)       WiU  mere  expressions  of  opinion,  belief,  or  expec- 
tation, invalidate  a  contract  ? 

36-  Will  representations  of  an  intention  amount  to 

a  fraud? 

37-  Give  several  illustrations  of  the  application  of  the 

principles  covered  by  the  last  two  questions. 
38- (f)       What  is  essential  in  false  representations,  to  en- 
able one  to  rescind  a  contract  or  maintain  an  ac- 
tion for  deceit  in  procuring  same  ? 

39-  Can  one  who  did  not  know  that  the  statements 

made  were  false  or  one  who  disbelieves  such 
statements  as  made,  take  advantage  of  same? 

40-  Is  it  necessary  that  the  false  representations  be 

the  sole  motive  in  entering  into  a  contract  to 
avoid  same  for  that  cause? 

41-  What  duty  of  investigation  does  the  law  impose 

upon  one  entering  into  contracts? 
42- (g)      Is  it  essential  that  there  be  an  intention  to  de- 
ceive in  making  a  false  representation? 
43-  What  is  sufficient  in  making  false  representations, 

to  work  an  invalidation  of  a  contract  ? 
44- (h)      Will  false  representations  made  to  a  third  party 

give  grounds  for  invalidating  a  contract^if  so, 

when? 
45-  Can  a  statement  to  the  general  public  amount  to 

a  fraud  on  any  individual? 
46- (i)       Does  legal  fraud  exist  where  no  injury  results 

from  fraudulent  representations? 
47-  Is  it  a  legal  fraud  to  make  false  representations  to 

induce  one  to  perform  a  legal  duty? 


DEPARTMENT  OF  LAW  151 

48-  When  will  false  representations,  followed  by  no 

•  actual  damage,  give  basis  for  rescinding  a  con- 
tract? 

49- (j)  May  a  person  injured  by  fraud,  apart  from  con- 
tract, maintain  an  action  for  damages  therefor — 
if  so,  under  what  form  of  action? 

50-  Will  courts  of  equity  afford  relief  for  misrepresen- 

tation— if  so,  how? 

51-  What  choice  of  action  has  an  injured  party  upon 

discovery  of  fraud? 

52-  Upon  what  is  the  right  to  recover  damages  de- 

pendent as  a  general  rule  ? 

53-  How  is  the  right  to  avoid  a  contract  limited — state 

fully? 

54-  Are  contracts  secured  through  misrepresentations 

void  or  voidable  ? 

55-§101  Define  misrepresent  atlon,  and  distinguish  it 
(a)         from  fraud  and  mistake  ? 

56-  How  is  misrepresentation  confused  with,  and  t(5 

be  distinguished  from,  *' condition"  or  ''war- 
ranty" in  a  contract? 

57- (b)  What  is  essential  to  constitute  legal  misrepresen- 
tation? 

58- (c)  What  matters  of  opinion  or  of  hearsay  constitute 
misrepresentation  ? 

59- (d)  Is  a  true  statement  of  fact  ever  a  misrepresenta- 
tion? 

60-  Is  there  a  legal  misrepresentation  where  the  party 

to  whom  it  is  made  knows  the  facts  ? 

61-  Is  a  misrepresentation,  made  after  the  transaction 

is  entered  into,  legally  a  false  statement  ? 

62-  Is  misrepresentation  operative  where  both  parties 

have  equal  opportunity  to  know  the  truth? 

63- (e)  What  is  finally  essential  to  make  a  mis-statement 
legally  operative  ? 

64-  How  do  misrepresentations  as  to  an  immaterial 

fact  effect  a  contract  ? 

65- (f)  What  is  essential  in  order  to  render  misrepresen- 
tations an  effective  ground  for  avoiding  a  con- 
tract? 


152       AMERICAN  EXTENSION  UNIVERSITY 

66-  What  class  of  contracts — and  for  what  reason — 

are  an  exception  to  the  general  rule  placing  ob- 
ligations not  to  misrepresent  concerning  same? 

67- (h)  Can  one,  in  equit}^,  rescind  a  contract  which  he 
made  by  misrepresentation  of  the  other  party? 

68-  What  innocent  misrepresentations  are  held  suffi- 

cient to  enable  the  party  misled  thereby  to 
avoid  the  contract? 

69- §102  What  kind  of  mistake  does  |he  law  take  cogniz- 
(a)         ance  of? 

70-  How  will  courts  correct  mistake  of  intention,  and 

how  mistakes  of  expression,  in  a  contract? 

71-  How  does  legal  mistake  affect  a  contract  ? 

72-  What  is  essential  in  mistakes  for  it  to  have  this 

effect? 

73-  Define  mistake. 

74-  Define  mistake  of  fact. 

75- (b)      When  will  mistake  as  to  the  subject  matter, of  a 

contract  avoid  same — illustrate? 
76- (c)      Does  mistake  of  law  avoid  a  contract? 

77-  Does  mistake  of  a  foreign  law  avoid  a  contract? 

78-  How  does  fraud,  or  violation  of  confidence,  coupled 

with  mistake,  affect  a  contract? 

79- (d)  Will  honest  mistake  as  to  the  identity  of  the  other 
party  to  a  contract  give  grounds  for  rescinding 
same — and  why? 

80- (e)  Where  a  contract  is  executed  fully,  or  in  part,  be- 
fore mistake  is  discovered,  can  the  consideration 
given  therefor  be  recovered? 

81-  What  is  the  effect  on  a  contract  where  the  mistake 

is  the  direct  result  of  fraud? 

82-  What  legal  rights  has  a  mistaken  party  in  an  exe- 

cutory contract  ? 

83-  Does  mistake  as  to  collateral  facts  furnish  a  basis 

for  rescinding  a  contract? 

84-  What  choice  of  remedies  must  one  make  who  is  en- 

titled to  avoid  a  contract  on  the  ground  of  mis- 
take? 

85-§103    Define  undue  influence. 

86- (a)     Of  what  may  undue  influence  consist — state  fully? 


DEPARTMENT  OF  LAW  153 

87- (b)  What  defence  to  a  claim  of  undue  influence  has  a 
party  against  whom  such  influence  is  charged? 

88-  How  far  do  the  rules  applicable  to  fraud  and  du- 

ress apply  to  cases  involving  undue  influence  ? 


PROOF    OF    CONTRACTS. 

1-§104.  What  doeo  the  proof  of  a  contract  involve? 

2-  Who  deciaes  the  questions  of  fact  thus  arising? 

3-  Under  what  subject  will  the  general  rules  as  to 

proof  be  found? 
4-§105.  How  are  contracts  under  seal  proven? 
5- (a)      How  are  other  contracts  proven? 

6-  What  is  meant  when  one  says  that  sealed  contracts 

prove  themselves? 

7-  What  can  you  say  as  to  attesting  witnesses  upon 

sealed  contracts ;  how  proof  is  made  in  their  ab- 
sence ;  and  present  requirements  as  to  such  wit- 
nesses? 
8-(b)      When  is  oral,  or   parol    evidence    admissible   to 
prove  a  contract  ? 

9-  What  contracts  cannot  be  established  by  parol  tes- 

timony? 

10-  Name  contracts  which  require  parol  testimony  to 

prove  same. 

11- (c)  What  circumstances,  showing  a  contract  to  be  in- 
valid can  be  proven  by  parol  ? 

12-  In  what  cases  can  lack  of  consideration  be  shown 

by  parol? 

13-  State  the  facts  in  the  case  of  Rhine  v.  Allen. 

14- (d)  What  facts,  supplemental  to  the  contract,  can  be 
proven  by  parol? 

15-  What  may  be  so  proven  in  "explanation"  of  the 

contract? 

16-  What  may  not  be  so  proven? 

17-  What  degree  of  "indefiniteness"  is  necessary  tO 

sanction  oral  proof  of  a  contract  in  writing? 

18-  What  can  you  say  as  to  admissibility  of  oral  proof, 

of  a  custom  or  usage? 
19- (e)      Upon  what  theory  is  such  evidence  allowed? 


154       AMERICAN  EXTENSION  UNIVERSITY 

20-  What  is  essential  as  to  the  custom  sought  to  be  so 

proven? 

21- (f)  What  is  the  nature  of  the  remedy  in  case  of  mis- 
take in  drawing  a  contract? 

22-  What  must  be  the  nature  of  the  mistake  to  war- 

rant verbal  proof  thereof? 

23-  State  fully  the  factor  of  fraud  in  the  procuring  of 

a  contract  to  warrant  proof  in  an  action  to  cor- 
rect same. 

24-  When  will  equity  rectify  a  mistake,  even  though 

it  be  not  mutual? 


Ammran  lExtmBmn  Imtr^rHttg 

(Non-Resident  Instruction). 
Chartered  under  the  Laws  of  California. 


Extension  Law  Course. 
Frank  C.  Smith,  LL.  B.,  Dean. 
LESSONS  10  to  15.— 

TITLE  IV.— NEGOTIABLE  INSTRUMENTS. 
By  Charles  Coan,  LL.,  "B. 

LESSON  10.— 

CHAPTER  I. 

GENERAL   CHARACTERISTICS   AN  D  KINDS. 

§1.   Importance  and  Origin. 

2.  The  "Law  Merchant." 

3.  What   is   "Negotiability?" 

4.  Essentials  of  Negotiability. 

5.  Forms  of  Negotiable  Instruments. 

6.  Certain  Instruments  Distinguished. 

(a)  In    General. 

(b)  Parties. 

7.  Liability  of  Parties. 

8.  Definitionte. 

9.  Consideration. 

10.  Law  Governing  Commercial  Pap^r. 

11.  How  Made. 

12.  Promissory  Notes. 

13.  Bills  of  Exchange. 

14.  Checks. 

15.  Bank  Notes. 

16.  Bonds  and  Stocks, 

17.  Letters  of  Credit. 

18.  Certificates  of  Deposit. 

19.  Bills  of  Lading. 

§1.  Importance  and  Origin. — Negotiable  instruments 
including,  as  the  term  does,  bills  of  exchange,  promissory 
notes,  checks,  corporate,  governmental,  and  municipal 
bonds,  bank  drafts,  bank  notes,  letters  of  credit,  certificates 
of  deposit,  and  other  forms  of  financial  and  commercial 
paper,  comprises  one  of  the  largest  branches  of  the  law  of 
contracts.  These  varying  instruments  have  several  attri- 
butes in  common  and  yet  each  possesses  distinctive  legal 
qualities  distinguishing  it  from  the  others. 

The  law  relating  to  commercial  paper  presents  the 
widest  divergence  from  the  general  principles  governing 


2  AMERICAN  EXTENSION  UNIVERSITY. 

contracts  of  any  of  the  departments  of  contracts.  This 
arises  from  the  fact  that  the  rules  applicable  to  bills  and 
notes — those  instruments  most  commonly  in  use  in  com- 
mercial life — did  not  have  their  origin  in  the  English  com- 
mon law,  but  were  a  part  of  the  Law  Merchant  of  Lombardy 
and  other  commercial  cities  of  Italy,  and  were  therefrom 
adopted  by  the  early  traders  and  bankers  of  England,  and 
ultimately  grafted  on  to  the  English  Common  Law. 

§2.  "Law  Merchant" — This  body  of  law — known  in 
its  original  language  as  the  "lex  mercatoria,"  and  now 
frequently  so  called — was  a  system  of  law  governing  mer- 
chants and  mercantile  transactions  during  the  mediaeval 
era  and  afterwards,  throughout  Southern  and  Western 
Europe.  It  harmonized  the  mercantile  law  of  the  different 
commercial  cities  and  nations,  and  was  of  more  universal 
authority  than  the  common  law  of  England.  ^  As  already 
stated,  it  was  adopted  into  the  English  law,  and  is  a  part  of 
the  common  law  of  this  country.  Its  rules  are  the  basis,  not 
only  of  our  general  law  affecting  negotiable  instruments, 
but  the  uniform  Negotiable  Instruments  Law  adopted  by 
many  of  the  states — and  certain  to  be  adopted  by  all  of  them 
in  due  time, — and  the  like  present-day  law  of  England  and 
her  colonies,  may  be  said  to  be  the  modern  exponent  of  the 
Law  Merchant.  ^ 

§3.  What  Is  Negotiability. — Those  forms  of  negotiable 
instruments  coming  under  the  classification  of  commercial 
paper,  and  including  principally — and,  perhaps,  only — bills 
of  exchange,  promissory  notes,  checks  and  such  other  forms 
as  fulfill  the  same  special  purposes  as  these,  are  the  rejjre- 
sentatives  of  money — itself  a  representative  of  value — and 
they  therefore  partake  of  many  of  the  attributes  of  money 
and  possess  privileges  not  shared  by  any  other  kind  of  per- 
sonal property.  This  money-quality,  this  representative  of 
money  value,  which  enables  such  paper  to  pass  from  hand 
to  hand  until  its  maturity  as  money,  and  which  endows  it 

*  Ranflolph  on  Commercial  Paper,  §1.  in  defining  the  jurisdiction   of   tlie 

*  A  very    important    and    interesting  United   States   circuit   and   district 

discussion  of  the  law  merchant  is  courts  congress    specifically    recog- 

contained  in  an  appendix  to  Vol.  1  nizes  this  system  of  law  by  giving 

of  Cranch'ls  United  States  supreme  &uch  courts  jurisdiction  over  cases 

court   reports.      See  also  Supp.   to  arifeing  thereunder. 
U.  S.  Rev,  Stat.  c.  137,  §1,  where, 


DEPARTMENT  OF  LAW.  3 

with  these  special  privileges,  arises  from  its  quality  of 
"negotiability." 

This  distinguishing  characteristic  is  that  arising  from 
the  form  of  the  paper  by  which  the  legal  title  thereto,  and 
to  the  whole  amount  of  money  expressed  upon  its  face,  may 
be  transferred  from  one  person  to  another  by  indorsement 
and  delivery  of  the  paper  by  its  holder,  or,  on  paper  of  a 
certain  form,  by  delivery  only.  ^  Negotiability,  as  applied 
to  commercial  paper  means  not  only  that  the  instrument 
may  be  transferred,  and  that  the  transferee  may  bring  an 
action  on  it  in  his  own  name,  but  also  that  such  transfer 
shall  be  subject  to  no  equities  or  rights  between  prior 
parties,  and  that  out  of  the  transfers  of  the  paper  shall  grow 
an  orderly  commercial  relation  and  liability  between  the 
holder  and  all  persons  whose  names  are  on  the  paper.  * 

§4.    Essentials  of  Negotiability. — To  render  an  instru- 
ment negotiable  it  must,  in  its  form  and  substance,  contain 
factors,  the  presence  of  all  of  which  makes  the  instrument 
legally  negotiable,  and  the  absence  of  any  one  of  which  may 
render  it  non-negotiable,  or  at  best,  only  quasi-negotiable. 

These  essential  factors  are:  (1)  a  date;  (2)  a  promise 
to  pay  money;  (3)  certaint}^  of  the  payee;  (4)  definiteness  of 
amount  to  be  paid;  (5)  certainty  of  time  of  payment,  i.  e. 
the  date  of  the  maturity  of  the  instrument;  (6)  definiteness 
of  place  of  payment;  and,  (7)  certainty  as  to  the  payor  or 
promisor,  i.  e.  the  party  who  made  and  issued  the 
instrument. 

§5.  Forms  of  Negotiable  Instruments. — The  usual 
forms  of  negotiable  paper  are  bills  of  exchange — usually 
called  bills  or  drafts — promissory  notes,  and  checks.  The 
essentials  above  mentioned  must  all  be  complied  with  in 
order  for  these  instruments  to  be  truly  negotiable,  and  it  is 
well  to  dwell  upon  this  fact  with  emphasis  so  that  it  may  be 
clearly  fixed  in  the  mind. 

To  illustrate :  a  negotiable  instriunent  must  be  for  the 
payment  of  money  and  only  money.  If  it  is  payable  in  any 
kind  of  property  or  of  work  or  services,  it  is  not  negotiable. 
Accordingly,  a  note  promissing  to  pay  one  hundred  dollars 
in  '*oil  stock,"  or  in  "cattle,"  or  in  "work  and  labor"  is 

*  See  1  Daniel,  Neg.  Insts.  1.  *  Bouvier's  Law  Diet. 


4        AMERICAN  EXTENSION  UNIVERSITY 

unnegotiable.    Likewise  a  draft,  or  a  check  so  payable. 

The  instrument  must  contain  no  conditions.  The 
promise,  or  the  request,  or  the  order,  as  the  case  may  be, 
must  be  absolute,  as  has  been  said.  The  full  amount  called 
for  must  be  paj^able  at  all  hazards,  and  not  dependent  upon 
any  contingency.  Thus ,  an  instrument  calling  for  the 
payment  of  a  certain  sum  of  money  "out  of  the  sale  of  my 
crops,"  is  not  negotiable,  although  it  is,  otherwise,  a  good 
evidence  of  indebtedness.  These,  and  the  other  requisites 
of  negotiability  will  be  farther  treated  in  the  discussion  of 
the  several  kinds  of  negotiable  paper. 

§6.  Certain  Instruments  Distinguished,  (a)  In 
Creneral. — There  are  some  essential  differences  between 
drafts,  checks  and  notes,  which,  while  they  have  much  in 
common,  it  is  well  to  get  a  clear  understanding  of  before 
taking  them  up  separately. 

In  a  bill  of  exchange,  or  draft,  one  person  requests 
another  to  pay  still  another  a  certain  sum  of  money.  Three 
parties  are  here  involved.  The  first — ^the  one  who  issues 
the  paper— is  called  the  drawer;  the  second — the  one  to 
whom  the  paper  is  addressed — is  called  the  drawee ;  and  the 
third — the  one  to  whom  the  paper  is  given,  or  made  payable 
— ^is  called  the  payee. 

A  check  is  a  bill  of  exchange,  but  it  has  some  features 
which  give  it  a  special  character  necessary  to  carefully 
note.  A  bill  of  ordinary  character  may  be  drawn  on  any 
person  or  corporation;  but  a  check,  in  order  to  be  such, 
must — and  can — be  drawn  only  upon  a  bank  or  banker. 
Furthermore,  a  bill,  like  a  promissory  note,  may  be  payable 
on  time,  that  is,  after  a  stated  period  such  as  "ten  days 
after  sight"  or  "ten  days  after  date,"  as  well  as  "at  sight," 
or  "on  demand,"  whereas  a  check  must  always  be  drawn 
payable  on  demand.  If  an  instrument  although  intended 
as  a  check  does  not  comply  with  these  two  requirements, 
it  is  not  a  check,  but  a  draft.  Thus  we  see  that  all  checks 
are  drafts,  but  all  drafts  are  not  checks. 

Important  differences  between  these  instruments, 
too,  are  the  facts  that  a  check — and,  indeed,  a  promissory 
note — need  not  be  protested  in  the  event  of  non-payment, 
whereas  protest  is  required  of  bills  of  exchange;  and,  that 
delay  in  presenting  a  bill  to  the  drawee  will  absolutely 


DEPARTMENT  OF  LAW  5 

exonerate  the  drawer,  but  delay  in  presenting  a  check  will 
not  have  this  effect  unless  the  drawer  has  been  injured 
thereby. 

(b)  Parties. — On  promissory  notes  only  two  parties 
are  primarily  involved,  namely,  the  maker  or  promisor,  and 
the  payee  or  promisee. 

Besides  the  parties  to  the  instruments  under  consider- 
ation already  defined,  there  may  be  three  others,  legally 
speaking,  i.  e.  the  indorser,  the  indorsee,  and  the  holder.  If 
the  payee  or  other  holder  of  such  paper  made  payable  to  his 
order  wishes  to  transfer  it  to  another,  he  must  do  so  b}" 
writing  his  name  across  the  back  of  it, — indorsing  it  in 
other  words — and  by  delivery  of  it  to  the  other  party,  who 
is,  in  legal  contemplation,  the  purchaser  of  the  paper. 
When  this  is  done  the  party  so  transferring  is  known  as  the 
indorser,  the  party  so  receiving  is  the  indorsee,  and  while 
he  remains  the  owner  of  the  paper  he  is  its  holder.  Thus 
the  holder,  upon  such  transfer  by  him  of  the  paper  becomes 
the  indorser,  and  his  indorsee  or  purchaser,  becomes  also 
the  holder. 

§7.  Liability  of  Parties. — The  legal  liability  of  the 
various  parties  to  these  instruments  is  different  each  from 
the  other,  and  it  is  important  that  an  accurate  understand- 
ing thereof  be  had.  Some  are  responsible  primarily,  othei's, 
secondarily. 

On  a  bill  of  exchange  as  it  is  originally  drawn,  the  only 
person  then  liable,  is  the  drawer.  To  make  the  drawee  re- 
sponsible he  must  agree  to  pay  it,  and  he  makes  and  signi- 
fies this  agreement  by  accepting  the  draft.  His  doing  so  is 
termed  an  "acceptance"  and  is  usually  evidenced  by  his 
writing  or  stamping  the  word  *' accepted"  across  the  face 
of  the  instrument  and  signing  his  name  thereunder.  Upon 
doing  this  he  becomes  the  "acceptor"  and  the  one  then 
liable  principally  on  the  paper. 

If  acceptance  of  a  bill  is  refused  the  holder  may  im- 
mediately sue  the  drawer.  If  acceptance  is  given,  the 
holder  must  wait  until  the  instrument  matures,  at  which 
time  he  must  present  it  to  the  acceptor  for  payment.  If 
it  is  not  then  paid  he  must  protest  it,  and  give  due  notice 
of  such  non-payment  to  the  drawer,  in  order  to  legally 
hold  him. 


6  AMERICAN  EXTENSION  UNIVERSITY 

By  this  it  is  seen  that  the  drawer  of  a  bill  is  only  sec- 
ondarily liable  after  the  drawee  has  accepted  it,  and  that 
he  will  be  bound  to  pay  only  if  the  acceptor — the  party 
primarily  liable — fails  to  do  so,  and  if  protest  for  such 
non-payment  be  made,  and  notice  of  the  protest  be  duly 
given  him. 

In  the  case  of  a  promissory  note  the  maker  is  primarily 
responsible  throughout. 

The  liability  of  an  indorser  is  secondary.  By  writing 
his  name  on  the  back  of  the  bill  he  says  in  effect:  "If  the 
drawee  does  not  accept,  or  if  the  drawee  having  accepted 
does  not  pay,  I  will,  provided  that  the  instrument  has  been 
presented  to  him  for  acceptance,  or  payment  demanded, 
and  notice  of  non-acceptance  or  non-payment  has  been 
given  to  me.'' 

§8.  Definitions. — Summarizing  what  has  already  been 
said  in  drawing  the  distinctions  between  certain  kinds  of 
instruments  and  showing  the  liability  thereon  of  the  severral 
parties  thereto,  these  definitions  will  be  found  helpful: — 

A  promissory  note  is  an  unconditional  promise  in 
writing  for  the  payment  of  a  sum  of  money,  by  one  person 
to  another,  on  demand,  or  at  a  fixed  determinable  future 
date,  or  to  the  order  of  a  specified  person,  or  to  bearer.  ^ 

A  bill  of  exchange  is  an  unconditional  request  or  order 
in  writing,  by  one  person  addressed  to  another  person, 
directing  such  person  to  pay,  at  a  time  therein  stated,  the 
sum  of  money  therein  named,  to  a  third  person,  also  named 
therein.  ^ 

A  check  is  a  written  order  on  a  bank  or  banker,  drawn 
against  a  deposit  of  funds,  directing  the  payment  of  the 
amount  named  therein  to  a  person  therein  named,  or  to  his 
order,  or  to  bearer,  immediately  on  its  presentation.  ' 

The  person  giving  a  promissory  note  is  called  the 
maker.  If  it  is  drawn  in  favor  of  a  specific  individual 
named  in  the. body  of  the  paper,  and  not  merely  to  "bearer'' 
or  to  "cash,"  he  is  known  as  the  payee.  Notes  are  fre- 
quently drawn  to  the  maker's  own  order;  they  then  take 
effect  only  on  indorsement  and  delivery  by  him. 

A  person  drawing  a  bill   of  exchange   is   called   the 

•Hall  V,  Farmer,  5  Denio,  486.  '  Bowen  v.  Newell,  5  Sanf.  328. 

*  Bouvier's  Law  Diet. 


DEPARTMENT  OF  LAW  7 

drawer;  the  person  on  whom  it  is  drawn,  the  drawee;  and 
the  one  in  whose  favor  it  is  drawn,  the  payee.  When 
accepted  by  the  drawee,  he  becomes  the  acceptor. 

Indorsement  is  the  transfer  of  an  instrument  written 
on  the  paper,  and  usually  consists  of  writing  the  name 
across  the  back  of  the  instrument.  ^  The  person  so  trans- 
ferring is  called  the  indorser;  the  party  to  whom  the  paper 
is  then  delivered  is  the  indorsee  and  the  holder. 

Dishonor  of  commercial  paper  is  the  neglect  or  refusal 
of  the  person  primarily  liable  thereon,  to  liquidate  the  same 
according  to  its  terms  at  the  time  of  its  maturity.  A  bill  of 
exchange  is  also  termed  dishonored  when  the  person  on 
whom  it  is  drawn  refuses  or  declines  to  accept  same  on  its 
presentation  to  him  for  that  purpose. 

The  time  when  the  paper  is  due  and  payable  is  spoken 
of  as  its  maturity.  Formerly  it  was  the  practice  to  allow 
**days  of  grace,"  usually  three  in  number,  after  the  expu'a- 
tion  of  the  time  limited  for  the  payment  of  a  bill  or  note, 
the  paper  being  then  fully  payable  on  the  last  day  of  grace. 
But  this  indulgence,  unnecessary  now  in  these  days  of 
rapid  and  sure  communication  and  transmission,  has  been 
done  away  with  by  statute  in  most  all  of  the  states. 

Maturity  therefore  may  now  be  said  to  be  the  day  indi- 
cated in  an  instrument  itself  as  its  due  date.  If  payable 
*'on  demand,"  or  "at  sight,"  it  matures  when  presented. 
Some  of  the  states  fix  a  time  by  statute  determining  the 
time  of  the  maturity  of  such  instruments  as  are  payable 
"on  demand."  Where  this  is  not  so  provided  for,  however, 
presentation  of  the  paper  for  payment  fixes  its  maturity. 

§9.  Consideration. — Commercial  paper  must  be  based 
upon  a  consideration  either  actual  or  presumed.  The  con- 
sideration is  expressed  by  the  term  "value  received"  in  an 
instrument  when  it  is  used;  otherwise  it  is  implied. 

There  is  sometimes  issued  what  is  called  "accommoda- 
tion paper"  where  one,  without  actual  consideration,  and 
wholly  to  accommodate  another,  gives  his  paper,  or  his  in- 
dorsement, for  the  purpose  of  enabling  the  latter  to  procure 
credit.  Between  the  parties  themselves  there  is  no  liability 
on  paper  of  this  character;  but  when  it  passes  into  the 
hands  of  a  bona  fide  holder,  who  gives  value  for  it  and 

•Com.  V.  Spilman,  124  Miss.,  329, 


8  AMERICAN  EXTENSION  UNIVERSITY 

without  notice  that  it  is  merely  an  accommodation  paper, 
he  is  entitled  at  maturity  to  recover  from  the  accommodator 
if  necessary,  the  amount  named  therein,  notwithstanding 
the  fact  that  there  was  no  actual  consideration  passed  be- 
tween the  original  parties  at  the  inception  of  the  paper.  ^^ 

§10.  Law  Governing  Commercial  Paper. — It  is  fre- 
quently the  case  that  commercial  paper  in  the  due  course 
of  modern  business  life  circulates  from  one  state  to  another, 
and  at  maturity  is  far  from  the  place  where  it  was  issued. 
In  such  event  it  becomes  important  to  determine  what  law 
applies  to  it.  It  may  be  said  in  general  that  the  law  of  the 
place  where  an  instrument  is  delivered  is  that  which  con- 
trols it.  This  is  what  is  termed  the  law  of  place.  There 
may  be  instances  where  it  is  rather  difficult  to  determine 
just  what  law  applies,  but  these  are  now  of  rare  occur- 
rence, and  the  rule  here  laid  down  is  a  safe  one  to  follow 
in  the  large  majority  of  cases.  ^^ 

r 

The  validity  of  paper  itself  is  fixed  by  the  law  of  the 
place  where  it  is  made.  If  valid  there,  it  can  be  enforced 
anywhere,  except  in  those  cases  where  it  appears  on  the 
face  of  the  instrument  that  it  is  void  on  the  ground  of 
public  polic}^  The  nature,  obligation  and  interpretation 
of  such  instruments  are  governed  by  the  law  of  the  place  of 
their  payment. 

§11.  How  Made. — It  will  be  observed  that  in  the  defi- 
nition of  each  form  of  commercial  paper  there  is  implied  an 
instrument  in  writing.  This  does  not  requii'e  that  it  must 
necessarily  be  written  in  ink.  ^^  It  may  be  in  pencil  or  any 
other  substance  capable  of  making  legible  writing.  This  of 
course  includes  printing,  at  least  so  far  as  the  body  of  the 
instrument  is  concerned,  though  the  signature  must 
be  actually  written.  The  use  of  a  mechanical  device  of  any 
kind  in  affixing  a  signature  would  hardly  answer  the  re- 
quirements. ^^ 

The  signature  of  the  maker  is  usually  placed  at  the 
lower  right  hand  corner  of  the  instrument,  and  as  has  been 
said  before  the  names  of  the  indorsers  on  the  back. 

"Dunn  V.  Weston,  71  Me.,  273.  '*  Commonwealth  v.  Ray,  3  Gray,  447. 

"Commercial   Bank   v.    Simpson,    90      "Reg.  v.  Harper,  15  Am.  Law  Rev., 
N.  C,  471.  553. 


DEPARTMENT  OF  LAW  9 

The  time  of  delivery  is  as  a  rule  shown  by  the  date  of 
an  instrument,  and  when  there  is  a  date  it  is  presumed  that 
the  paper  was  delivered  at  that  time. 

No  particular  form  of  words  are  necessary  to  consti- 
tute a  negotiable  instrument,  except  that  they  must  cover 
the  essential  features  of  such  instruments  heretofore 
pointed  out.  Where  no  time  is  expressed  as  to  when  the 
instrument  is  to  become  due  it  is  held  to  be  payable  on 
demand.  The  words  ' '  order "  or  "  bearer, ' '  or  their  equiva- 
lent, placed  in  connection  with  the  name  of  the  payee,  are 
necessary  to  show  negotiability.  If  made  payable  to  a 
named  person  only  without  some  such  word,  the  paper  is 
not  negotiable.  When  made  payable  to  bearer,  such  paper 
may  be  transferred  by  delivery  without  the  necessity  of  in- 
dorsement by  the  holder. 

§12.  Promissory  Notes. — As  has  been  stated  the  usual 
form  of  a  note  after  giving  the  place  where  made,  and  the 
date,  either  provides  "on  demand,"  or  a  specific  time  ''after 
date,"  a  promise  to  pay  "to  bearer,"  or  "to  the  order  of," 
a  specific  person  therein  named,  a  sum  of  money  at  a  fixed 
or  determinable  future  date,  and  usually  has  a  place  of  pay- 
ment named  therein.  It  becomes  effective  on  delivery.  At 
the  time  of  payment  when  according  to  the  terms  of  the  in- 
strument it  is  due,  it  must  be  presented  for  payment  to  the 
maker,  and  if  a  place  of  payment  is  named  therein,  the 
presentation  and  demand  must  be  made  at  that  place.  If  no 
place  of  payment  is  named  in  the  paper  it  should  be  pre- 
sented at  the  place  of  the  residence  or  at  the  usual  place  of 
business  of  the  maker.  If  no  such  place  can  with  reason- 
able diligence  be  found,  it  is  the  general  rule  that  then 
presentation  for  payment  is  not  required  in  order  to  charge 
the  maker. 

Where  a  note  is  signed  by  two  or  more  makers  it  may 
be  either  joint  or  joint  and  several.  If  it  reads:  "We 
promise,"  it  is  joint  only,  but  if  signed  by  two  or  more  per- 
sons and  begins  "I  promise,"  or  "We  jointly  and  severally 
promise,"  it  is  both  joint  and  several.  If  signed  by  a  firm 
or  a  corporation  it  is  both  joint  and  several.  This  means 
that  the  parties  are  liable  jointly  and  severalh^,  and  in  the 
case  of  a  firm  or  corporation  it  makes  no  difference  whether 
the  paper  reads,  "I,"  or  "We"  promise. 


10         AMERICAN  EXTENSION  UNIVERSITY 

§13.  Bills  of  Exchange. — Bills  of  exchange  are  of  two 
kinds,  domestic  or  inland,  and  foreign.  An  inland  or  do- 
mestic biU  of  exchange  is  one  drawn  and  payable  within  the 
one  state  or  country. 

A  foreign  bill  of  exchange  is  one  drawn  in  one  state 
or  country,  and  payable  in  another.  A  bill  drawn  in  one 
of  our  states  and  payable  in  another  is  therefore,  in  the 
legal  sense,  a  foreign  bill. 

Inland  or  domestic  bills  of  exchange  are  usually  drawn 
in  but  one  part,  and  the  same  is  the  practice  where  the  bill 
is  drawn  in  one  state  and  payable  in  another;  but  where  it 
is  payable  in  a  foreign  country  they  are  usually  drawn  in 
triplicate  for  greater  certainty  of  safe  carriage  and  trans- 
mission, the  duplicate  advices  to  the  drawee  being  mailed 
under  separate  covers.  Forms  of  these  and  also  of  other 
commercial  instruments,  will  be  given  in  the  lessons  on 
Forms. 

§14.  Checks. — One  of  the  most  common  forms  of  nego- 
tiable instruments  is  the  ordinary  bank  check  which  has 
already  been  defined.  We  have  seen  that  it  is  necessarily 
drawn  on  a  bank  or  banker;  that  it  presupposes  a  fund 
against  which  it  is  drawn,  and  that  it  is  payable  instantly 
on  demand.  As  stated  it  in  some  respects  resembles  an 
inland  bill  of  exchange ;  ^^  but  it  differs  in  the  essential  par- 
ticular that  it  presupposes  the  existence  of  a  fund  on  hand 
at  the  bank  at  which  it  is  to  be  paid;  ^^  that  it  must  be  drawn 
on  a  bank  or  banker;  and  that  it  is  payable  on  demand.  It 
passes  by  indorsement  or  delivery  in  the  same  manner  as  do 
other  like  negotiable  instruments.  It  has  been  held  that 
where  a  check  is  post-dated,  or  appears  to  be  payable  on  a 
future  day,  it  is  really  a  draft  or  bill  of  exchange  and  not 
a  check.  ^* 

A  check  should  always  bear  a  date;  and  it  has  been 
said  that  where  a  check  contains  no  date  it  is  never 
payable.  ^^  Another  standard  writer  says  that  this  question 
as  to  a  check  having  the  date  blank  has  never  been  adjudi- 
cated. ^®  While  the  Negotiable  Instruments  Law,  which  has 

"Conger  v.     Armstrong,     3     Johns.  "  Minturn  v.  Fisher,  4  Cal.,  36. 

Cas.    (N.   Y.),   5.  "Morse  on  Banking,   238. 

"Ebpy  V.    Bank    of    Cincinnati,    18  "Daniel   Neg.   Insts.,   p.   601. 

Wall    (U.  S.),   620. 


DEPARTMENT  OF  LAW  11 

been  adopted  in  many  of  our  states  contains  the  provision 
that  "Where  an  instrument  is  not  dated  it  will  be  con- 
sidered to  be  dated  as  of  the  time  it  was  issued,"  it  is  be- 
lieved that  a  bank  would  be  warranted  in  refusing  to  pay 
an  undated  check. 

The  question  of  when  a  check  should  be  presented  for 
payment  is  of  great  importance  and  will  be  fully  dwelt 
upon  later.  At  this  point  it  is  sufficient  to  say  that  it  must 
be  done  with  diligence  and  without  unnecessary  delay. 

The  question  whether  the  tender  of  a  check  instead 
of  money  in  paj^ment  of  a  debt,  is  good  in  law,  and  if  re- 
fused works  a  cancellation  of  the  debt ;  and  also  as  to  what 
is  a  proper  tender,  will  be  considered  later.  As  a  general 
rule,  we  may  say  that  where  the  parties  have  previously  in 
the  regular  course  of  their  business  transactions  used 
checks,  such  a  tender  would  be  held  to  be  good;  but  if  in 
prior  transactions  cash  had  always  been  used,  it  would  not 
be.  Of  course  if  a  check  is  paid  when  presented  a  debt 
thereby  recognized  is  discharged. 

§15.  Bank  Notes. — Bank  notes  while  not  generally 
looked  upon  as  being  negotiable  instruments  are  such  in 
fact.  They  are  the  promissory  notes  of  the  bank  or  banker 
issuing  them;  are  payable  on  demand,  and  are  intended  to 
and  generally  do  circulate  as  mone}^  In  the  United  States 
while  legally  state  banks  may  issue  notes,  yet  it  is  not  now 
done  because  of  the  bm*den  of  a  heav}^  federal  tax  thereon. 
Accordingly,  at  the  present  time  the  national  bank  system 
is  the  exclusive  source  of  bank  notes  in  this  country.  The 
issue  is  regulated  by  act  of  congress  and  can  only  be  done 
with  the  approval  of  the  United  States  treasury  depart- 
ment. The  banks  are  required  to  deposit  United  States 
bonds  with  the  department  to  secure  their  issues. 

It  may  be  remarked  in  passing  that  the  "scrip"  issued 
at  times  during  great  business  depression,  are  really  bank 
notes,  for  they  are  the  promises  of  the  banks  to  pay  money. 
Whether  these  issues  are  really  legal  has  always  been  a 
grave  question  which  has  not  yet  been  judicially  deter- 
mined. Bank  notes  must  not  be  confounded  with  United 
States  treasiu'y  notes  issued  by  the  United  States  govern- 
ment which  are  of  course  negotiable  instruments  of  like 
character.    These  and  bank  notes  are  not  securities  for 


12  AMEEICAN  EXTENSION  UNIVERSITY 

debt,  but,  to  all  practical  intents  and  purposes  are  money 
and  are  intended  to  serve  the  practical  uses  of  money. 

§16.  Bonds  and  Stocks. — The  bonds  of  corporations 
whether  municipal  or  private  are  also  negotiable  instru- 
ments and  are  frequently  so  made  specifically,  in  form  being 
drawn  "to  bearer,"  or  ''to  the  order  of,"  some  named  payee. 
They  are  clearly  so  as  to  their  legal  quality  of  transfer  by 
delivery  or  by  indorsement  clear  of  all  defenses.  The  in- 
terest on  bonds  is  usually  witnessed  by  coupons — that  is  to 
say,  by  small  notes,  maturing  at  the  several  interest  periods, 
and  covering  the  amount  of  interest  then  due — attached  to 
the  bond  itself.  These  coupons  may  be  severed  from  the 
bond  and  transferred  without  it.  Daniel  refers  to  them  as 
"Coupon  bonds."  ^® 

Corporate  bonds  are  as  a  rule  signed  by  the  president 
of  the  corporation  and  countersigned  by  such  other  officer 
as  the  corporate  laws  may  provide,  usually  the  secretary 
or  treasurer.  While  it  is  usual  to  also  attach  the  seal  of  the 
corporation,  it  is  not  at  all  necessary  to  do  so  in  order  to 
legalize  them.  While  bonds  are  usually  sealed  instruments, 
there  are  exceptions.  Bonds  may  be  issued  by  either 
private  or  public  corporations,  and  when  issued  by  a  public 
corporation  are  termed  municipal,  state  or  government 
bonds  as  the  case  may  be.  The  ordinary  corporate  stock 
certificate  may  also  be  included  in  this  general  class.  They 
may  be  said  to  be  governed  by  the  same  legal  rules  and  prin- 
ciples as  corporate  bonds. 

§17.  Letters  of  Credit. — Letters  of  credit  in  a  manner 
resemble  bills  of  exchange.  In  fact,  however,  they  differ 
materially.  A  letter  of  credit  is  used  when  a  person  intend- 
ing to  travel  desires  to  have  on  hand  ready  funds  at  the 
point  where  he  desires  to  make  use  of  them.  The  chief 
advantage  of  the  letter  of  credit  over  the  certified  check 
or  the  cashier's  check,  is  that  the  holder  may  at  any  time 
draw  thereon  only  the  amount  which  he  desires.  They,  like 
bank  notes,  are  not  securities  for  debt;  but  rather  letters  of 
request  whereby  one  person — usually  a  bank  or  banker — ^re- 
quests another  person — usually  also  a  bank  or  banker — to 
advance  money  and  give  credit  to  a  third  person;  and 

"Daniel  Neg,  Insts.,  p.  490. 


DEPAETMENT  OF  LAW  13 

wherein  the  person  issuing  the  letter  undertakes  to  repay 
such  sum  or  sums  as  may  be  so  advanced. 

Letters  of  credit  may  be  addressed  to  a  particular 
person,  and  if  so  they  are  known  as  "special"  letters.  Or 
they  may  be  addressed  to  no  person  in  particular,  simply 
to  "any  bank  or  banker"  for  instance,  and  are  then  called 
"general"  letters  of  credit.  Letters  of  credit  are  not  nec- 
essarily issued  for  a  certain  amount,  but  signify  the  largest 
amount  for  which  they  are  issued  and  will  be  honored  or 
redeemed  by  the  drawer.  As  they  are  drawn  upon  by  the 
holder  or  payee  the  banker  making  the  payment  indorses 
the  amount  paid  by  him  to  the  holder,  on  the  back  thereof 
or  on  some  other  prepared  space  on  the  letter.  This  is  done 
from  time  to  time  as  funds  are  called  for  up  to  the  total 
face  of  the  instrument. 

§18.  Certificates  of  Deposit. — Certificates  of  deposit 
are  receipts  for  money  deposited,  with  a  promise  to  hold, 
or  pay  it,  as  may  be  agreed  between  the  parties  and  as 
stated  in  the  certificate.  They  are  usually  issued  by  bank- 
ing houses  and  intended  more  as  funds  left  for  safe  keeping 
than  to  be  drawn  against.  They  represent  an  indebtediess 
of  the  issuing  party,  to  be  paid  on  siu-render  of  the  certifi- 
cate. They  usually  bear  interest  and  may  be  transferred 
by  indorsement  unless  restricted  thereon. 

§19.  Bills  of  Lading. — Bills  of  lading  which  are  really 
quasi-negotiable  instruments,  possess  certain  qualities 
which  render  them  in  some  respects  closely  akin  to  the 
nature  of  the  instruments  we  have  been  discussing.  They 
may  be  defined  as  the  written  acknowledgment  by  the  rep- 
resentative of  any  common  carrier,  that  he  has  received  the 
goods  therein  described,  for  the  voyage  or  journey  therein 
stated,  to  be  carried  upon  the  terms,  and  delivered  to  the 
persons,  therein  specified.  It  is  at  once  a  receipt  for  the 
goods  described  therein,  which  renders  the  carrier  respon- 
sible as  their  custodian,  and  an  express  written  contract  for 
their  transportation  and  delivery.  ^^ 

The  negotiable  natiu*e  of  bills  of  lading  arises  from  the 
fact  that  they  are  frequently  used  to  transfer  the  title  to 
goods  purchased,  before  their  delivery  to  the  buyer,  and 

»  Cavallaro  v.   Texas  Rwy.   Co.,   110   Cal.,  348. 


14         AMERICAN  EXTENSION  UNIVERSITY 

while  they  are  still  in  the  possession  of  the  party  issuing  the 
bill.  They  may  be  transferred  by  indorsement  and  when 
indorsed  pass  the  title  to  the  goods — and  the  goods  them- 
selves— the  same  as  by  an  actual  delivery  and  transfer 
thereof. 

A  bill  of  lading  should  state  the  quantity  of  merchan- 
dise covered  thereby;  such  marks  of  identification  as  may 
be  thereon;  the  names  of  the  shipper  and  of  the  consignee; 
of  the  master  of  the  ship  or  other  common  carrier  trans- 
porting them;  the  places  of  the  departure  and  of  the  dis- 
charge of  the  shipment ;  and  the  cost  of  the  freightage. 


QUIZZER. 

GENERAL   CHARACTERISTICS   AND  KINDS. 

1-§1.      What  does  the  term  "negotiable  instruments" 
include? 

2-  What  is  the  relative  importance  of  such  instru- 

ments in  the  law  of  contracts  ? 

3-  Is  the  law  relating  to  such   instruments   based 

upon    the    general    principles    of  the  law  of 
contracts  ? 

4-  If  not,  upon  what  is  any  divergence  based? 
5-§2.     Define  the  "Law  Merchant." 

6-  What  laws  did  this  system  harmonize? 

7-  How  did  it  become  a  part  of  the  English  Common 

Law? 

8-  Of  what  present-day  law  is  the  Law  Merchant  the 

basis  ? 
9-§3.      Of  what  is  commercial  paper  the  representative? 

10-  What  quality  attaching  to  commercial  paper  en- 

dows it  with  special  privileges? 

11-  What  are  the  special  privileges  attaching  to  com- 

mercial paper? 

12-  From  what  does  the  distinguishing  characteris- 

tics of  commercial  paper  arise? 

13-  What  is  negotiability? 

14-§4.     State  the  essentials  of  negotiability. 
15-§5.     What  are  the  usual  forms  of  negotiable  paper? 
16-  What  is  requisite  to  endow  paper  with  the  quality 

negotiability? 


DEPARTMENT  OF  LAW  15 

17-  In  what  only  must  a  negotiable  instrument  be 

payable  *? 

18-  Can  an  instrument  payable  in  work  or  property, 

be  negotiable?    Illustrate. 

19-  Can     an    instrument    containing    conditions    be 

negotiable  ? 

20-  What  quality  must  the  promise  or  order  of  a 

paper  possess  to  make  it  negotiable?  Illustrate. 

21-§6.  Describe  the  form  and  substance  of  a  bill  of 
exchange. 

22- (a)  How  many  parties  are  involved  in  a  bill  of  ex- 
change? Describe  the  relation  of  each  to  the 
paper,  and  state  what  he  is  called. 

23-  How  does  a  check  differ  from  a  bill  of  exchange? 

24-  Upon  whom  may  a  bill  be  drawn, — and  upon 

whom  must  a  check  be  drawn? 

25-  Are  all  checks  drafts, — and  are  all  drafts  checks? 

26-  What  is  the  difference  between  a  bill  or  a  note, 

and  a  check,  as  to  the  time  of  payment  thereof? 

27-  Distinguish  between  the  essentials  of  a  bill  and  of 

a  check. 

28- (b)     How  many  parties  are  there  to  a  promissory  note 

and  what  are  they  called? 
39-  What  is  the  common  technical  term  applied  to  the 

paper  ? 

30-  Define  an  indorser. 

31-  Define  an  indorsee. 

32-  Define  a  holder. 

33-  Describe  how  these  relations  succeed  each  other. 

34-  Define  indorsement. 

35-§7.  What  can  you  say  as  to  the  liability  of  the  various 
parties  to  commercial  paper. 

36-  Name  the  parties  liable  on  a  bill  of  exchange  and 

state  how  such  liability  is  created. 

37-  How  does  one  become  liable  as  an  acceptor  on 

such  paper? 

38-  Who  is  primarily  and  who  secondarily  liable  on 

bills  of  exchange? 

39-  What  is  the  common  technical  term  applied  to  the 

*' acceptance"  of  checks? 

40-  Who  is  principally  liable  on  certified  or  accepted 

checks? 


16        AMERICAN  EXTENSION  UNIVERSITY 

41-  What  right  has  a  holder  of  a  bill  the  acceptance  of 

which  is  refused? 

42-  What  must  a  holder  of  a  bill  do  if  it  is  accepted? 

43-  What  must  a  holder  do  if  a  biU  is  not  paid  at  ma- 

turity— and  for  what  reason? 

44-  What  is  the  liability  of  the  drawer  of  a  bill? 

45-  Who  is  primarily  liable  on  a  promissory  note? 

46-  What  is  the  liability  of  an  indorser, — and  what  is 

the  legal  effect  of  his  indorsement  ? 
47-§8.     What  is  a  promissory  note? 

48-  Define  a  bill  of  exchange. 

49-  Define  a  check. 

50-  What  do  we  term  the  person  who  makes  a  note  ? 

51-  The  one  in  whose  favor  a  note  is  drawn  is  called  by 

what  term? 

52-  When  does  a  note  become  effective? 

53-  Where  would  you  look  to  find  whether  there  were 

any  indorsements?  , 

54-  Name  the  parties  to  a  bill  of  exchange. 

55-  State  what  relation  they  each  bear  to  the  bill. 

56-  Define  what  is  meant  by  dishonor  of  commercial 

paper. 

57-  What  is  meant  by  the  term  maturity? 

58-  What  are  days  of  grace,  and  are  they  now  gen- 

erally in  use? 

59-  When  is  a  demand  note  due? 

60-  Is  there  any  exception  to  this  rule — ^if  so  what 

is  it? 
61- §9       What  is  the  rule  as  to  consideration,  as  affecting 
commercial  paper? 

62-  How  is  consideration  shown  in  an  instrument? 

63-  What  is  accommodation  paper? 

64-  What  is  the  liability   on   accommodation   paper 

when  in  the  hands  of  innocent  holders? 

65-  Is  there  any  different  rule  as  to  the  immediate 

parties — if  so,  what  is  it? 
66- §10.    What  do  you  understand  the  term  *^law  of  place" 

to  mean? 
67-  What  law  applies  to  the  validity  of  commercial 

paper? 

68-§ll.    Is   it   necessary   that   commercial   paper   be   in 
writing. 


DEPARTMENT  OF  LAW  17 

69-  What  is  covered  by  the  term  writing. 

70-  How  should  the  signature  be  affixed? 

71-  Where  on  the  paper  would  you  look  to  find  the 

name  of  the  maker? 

72-  How  would  you  fix  the  time  of  delivery  of  an 

instrument  ? 

73-  What  word  or  words  are  necessary  to  show  ne- 

gotiability? 

74-  Is  paper  made  payable  to  a  certain  named  per- 

son, only,  negotiable? 

75-  Must  a  note  made  to  bearer  have  an  indorsement 

in  order  to  transfer  it  ? 
76- §12     If  no  place  of  payment  is  stated  in  a  note  where 
should  it  be  presented? 

77-  When  is  a  note  a  joint  note,  and  when  several? 

78-  How  does  this  rule  affect  the  paper  of  a  firm  or 

corporation? 
79-§13.    How  many  kinds  of  bills  of  exchange  are  there? 

80-  What  is  the  difference  between  a  domestic  and  a 

foreign  bill  of  exchange? 

81-  In  what  forms  are  domestic,  and  what  form 

foreign  bills  usually  drawn? 
82- §14.    In  what  essential  particular  does  a  check  differ 
from  a  bill  of  exchange? 

83-  What  is  the  legal  effect  of  a  post-dated  check? 

84-  Would  a  bank  be  warranted  in  refusing  payment 

of  an  undated  check? 

85-  What  is  the  rule  as  to  presentation  of  a  check? 

86-  Does  a  payment  by  check  ever  cancel  a  debt? 
87-§15.    Are  bank  notes  negotiable  instruments? 

88-  What  is  the  difference  between  a  bank  note  and  a 

treasury  note  ? 

89-  What  can  you  say  concerning  the   use   and  the 

legality  of  bank  "scrip?" 
90-§16.    Are  corporation  bonds  negotiable  ? 

91-  Is  the  corporate  seal  necessarv  to  make  the  bond 

legal? 

92-  What  is  the  purpose  of  the  coupons  attached  to 

a  bond? 

93-  Are  the  coupons  negotiable  ? 

94-  What  is  the  difference  between  state  and  mu- 

nicipal bonds  and  those  of  a  private  concern? 


18         AMERICAN  EXTENSION  UNIVERSITY 

95-    *      What  can  you  say  as  to  the  nature  of  corporate 

stock?    State  fuUy. 
96-§17.    What  is  the  purpose  of  letters    of   credit,    and 

what  other  instrument  do  they  resemble? 

97-  Define  them. 

98-  Name  the  different  kinds  of  letters  of  credit. 

99-  What  is  the  difference  between  them? 
100- §18.    What  are  certificates  of  deposit? 

101-  When  are  they  usually  issued,  and  state  their 

characteristics  ? 
102- §19.    How  would  you  define  a  bill  of  lading? 

103-  Are    they    ever    spoken    of  as    negotiable    in- 

struments ? 

104-  From  what  does  the  negotiable  value  of  bills  of 

lading  arise  ? 

105-  What  are  they  usually  termed? 

106-  Can  a  bill  of  lading  be  transferred  and  if  so,  how? 

107-  What  should  a  bill  of  lading  contain?  State  fully. 


DEPARTMENT  OF  LAW  19 

LESSON  11.— 

CHAPTER  n. 

CONSIDERATION. 

§20.  Necessity  of  Consideration. 

21.  Good  Consideration. 

22.  Void  Consideration. 

23.  Good  and  Valuable  Consideration  Distinguished. 

§20.  Necessity  of  Consideration. — Coixunercial  paper 
requires  a  legal  consideration  to  support  it  of  the  same 
character  as  is  necessary  with  all  other  kinds  of  contracts. 
This  necessity  applies  jjetween  the  parties  to  the  instru- 
ment at  its  inception  as  well  as  to  those  who  become  con- 
nected with  it  later  on  by  indorsements.  Whether  one 
be  maker,  guarantor,  surety,  acceptor,  indorser,  or 
indorsee,  there  must  be  a  sufficient  consideration  to  sup- 
port the  several  contracts  thereby  entered  into,  or  the 
rights  of  the  respective  parties  cannot  be  legally  enforced.  ^ 

Each  separate  liability  requires  a  separate  considera- 
tion, so  that  the  consideration  for  the  making  of  an  instru- 
ment will  not  support  an  indorsement  after  its  delivery.  - 
What  consideration  is  necessary  is  determined  by  the  law 
of  the  place  where  the  paper  is  made.  ^  It  is  not  absolutely 
required  that  in  order  to  be  valid  a  consideration  must  be 
adequate  in  value  to  the  face  of  the  instrument.  Accord- 
ingly, paper  purchased  for  an  amount  below  its  face  value 
does  not  invalidate  the  transaction.  *  Unless  therefore  the 
good  faith  of  a  transaction  is  clearly  impeached,  inadequacy 
of  consideration  is  immaterial. ' 

§21.  Good  Consideration. — Money  loaned  or  ad- 
vanced, goods  sold  and  delivered,  or  a  money  value  in  any 
form,  is  always  a  good  consideration.  So  too  is  an  advance 
or  loan  to  a  third  person  made  at  the  request  of  the  maker 
of  an  instrument.  A  bill  or  note  may  be  given  in  contempla- 
tion of  a  liability  incurred  at  the  time,  but  payable  in  the 
future,  and  if  given  as  security  for  a  debt,  the  consideration 
is  good  also.  And  a  note  or  bill  given  by  one  to  discharge 
or  extinguish  the  debt  of  another,  ®  is  valid,  the  consider^- 

*  See  Ante,  §9.  ''Kitchen    v.    Loudenback,    48     Ohio 

•Williams  v.  Williams,  67  Mo.,  661.  St.,  177. 

•Evans  V.  Andertson,  78  111.,  558.  •  Stack     v.     Weatherwax,     52     Hun. 

*Tod  V.  Wick,  36  Ohio  St.,  392.  (N.  Y.),  615. 


20         AMERICAN  EXTENSION  UNIVERSITY 

tion  being  sufficient  if  the  original  debtor  is  discharged 
from  liability.  '^ 

Exchange  of  commercial  paper  of  any  description  is  a 
good  consideration  the  one  for  the  other,  and  they  need  not 
be  for  the  same  amount.  Each  instrument  is  an  independ- 
the  obligation  in  such  an  exchange,  not  conditioned  on  the 
payment  of  the  other  unless  such  condition  be  expressed  in 
the  paper.  ^  As  between  the  original  parties — the  paper  not 
having  been  transferred  to  an  innocent  holder — non-pay- 
ment of  one  obligation  may  be  available  by  the  issuer  of 
the  other  as  a  set-off  on  the  claim  of  payment  of  such  other 
instrument. 

Services  may  be  a  valuable  consideration  for  commer- 
cial paper  if  given  in  any  character  that  makes  the  service 
a  valuable  and  legal  one.  Services  rendered  or  contracted 
to  be  rendered  in  aid  of  an  illegal  end,  or  in  matters  that  are 
against  public  policy,  such  as  acting  as  lobbjdst  to  prociire 
legislation,  are  not  a  valid  consideration  to  support  paper 
given  therefor.  ^  An  agreement  for  services  to  be  rendered 
in  the  future  is  a  good  consideration;  and  a  promise  to  re- 
frain from  injurious  remarks,  promises  of  marriage,  and 
others  of  a  similar  character,  though  not  based  upon  a  pecu- 
niary character,  have  been  held  to  be  a  good  consideration. 

Where  a  bill  or  note  is  given  for  a  subscription  to  an 
educational,  benevolent  or  charitable  object,  for  which  sim- 
ilar obligations  of  others  have  been  given,  there  is  a  good 
consideration.  In  the  absence  of  other  like  obligations 
such  an  instrument  so  given  cannot  be  enforced  against  the 
maker.  ^^  Where  a  sufferer  from  a  fire  received  from  a  re- 
lief committee  money  raised  by  voluntary  subscription  to 
benefit  him  and  others  and  gave  his  note  for  it,  the  court 
held  that  there  was  a  good  consideration.  ^^  However  a 
note  given  by  a  child  to  a  parent  to  cover  an  advance- 
ment; ^^  and  a  note  given  to  be  used  in  equalizing  the  divi- 
sion of  a  parent's  estate,  would  not  be  enforceable  as  a 
debt  or  note  against  the  maker.  ^^ 

'Seymour  v.  Prescott,  69  Me.,  376.  Iowa,  596. 

*  Hall  V.  Henderson,  84  111.,  611.  "  Bayou    Sara    v.    Harper,     15     La. 

•Rose   V.   Truax,    21    Barb.    (N.   T.),  Ann.,  233. 

361.  "Marsh  v.  Chown,  104  Iowa,  556. 

'•Simpson     College     v.     Tuttle,     71  "  Hardin  v.  Wright,  32  Mo.,  452. 


DEPARTMENT  OF  LAW  21 

A  valid  consideration  is  also  necessary  for  the  exten- 
sion of  the  time  of  payment  of  an  instrument,  or  for  for- 
bearance to  sue  upon  it  at  maturity.  And  part  payment, 
or  a  payment  of  interest  in  advance,  before  maturity,  while 
then  a  sufficient  consideration  for  forbearance,  are  not  so 
after  the  paper  has  become  due.  ^*  The  giving  of  new 
security  for  over-due  paper  is  however  a  good  consideration 
for  such  extension  or  forbearance.  ^^ 

An  agreement  to  pay  a  note  already  overdue  will 
create  no  new  liability  unless  the  paper  be  outlawed,  when 
such  new  promise  will  take  it  out  of  the  statute  of  limita- 
tions, and  will  be  a  valid  consideration.  ^* 

§22.  Void  Consideration. — ^Where  negotiable  paper  is 
based  upon  an  agreement  against  public  safety  and  policy, 
as  with  an  enemy  in  time  of  war;  the  corrupt  procurement 
of  a  public  contract;  or  when  given  to  influence  the  conduct 
of  a  public  officer,  or  the  sale  of  a  public  office ;  it  is  without 
valid  consideration  and  is  void.  So  also  is  a  note  or  bill 
which  has  as  its  consideration  the  compounding  of  a  felony 
or  misdemeanor,  or  to  procure  or  facilitate  a  divorce  and 
the  like. 

A  bill  or  note  is  also  void  for  want  of  consideration  if 
it  be  given  to  restrain  or  prevent  a  marriage;  or  in  restraint 
of  trade;  or  is  based  on  a  bet  or  wager.  Nor  can  there  be 
any  valid  consideration  for  an  instrument  if  it  is  given  in 
violation  of  any  express  statutory  provision.  For  instance, 
paper  given  for  lottery  tickets,  where  their  sale  is  pro- 
hibited under  the  law;  or  for  violating  a  license 
law,  liquor  law,  or  Sunday  law  will  be  without  valid 
consideration. 

In  considering  the  cases  of  instruments  void  by  reason 
of  illegality  of  consideration,  there  is  a  distinction  between 
those  where  the  statute  declares  a  contract  founded  upon 
such  a  consideration  to  be  absolutely  void,  and  those  where 
the  consideration  is  held  to  be  void  by  the  courts.  In  the 
first  instance  the  instrument  is  void  even  in  the  hands  of  a 
bona  fide  holder  for  value;  in  the  second  it  is  void  only  as 
between  the  immediate  parties,  but  is  good  in  the  hands  of  a 
bona  fide  holder.  ^^ 

"Liening  v.  Gould,  13  Cal.,  598.  "  Vallett  v.  Parker,  6  Wend.  (N.  Y.), 

"Robertsen  v.  Blevlns,  57  Kan.,  50.  615. 

"  Stallings  v.  Johnson,  27  Ga.,  564. 


22         AMERICAN  EXTENSION  UNIVERSITY 

It  must  be  remembered  however  in  applying  the  rule 
as  to  consideration,  that  the  question  can  only  be  raised  be- 
tween the  original  parties  to  the  transaction  and  such  sub- 
sequent holders  as  have  notice  thereof  or  who  take  the 
paper  without  value,  ^^  In  such  cases  it  is  necessary  for  the 
defendant  to  prove  not  only  want  of  consideration  but  also 
that  the  plaintiff  is  not  a  bona  fide  holder  for  value.  This 
however  does  not  apply  in  the  cases  referred  to  above  where 
the  consideration  is  nullified  by  statute,  and  an  instrument 
so  given  is  of  no  value  in  the  hands  of  any  person  what- 
soever. 

§23.  Good  and  Valuable  Considerations  Distin- 
guished.— Consideration  is  divided  into  two  principal 
classes;  good  and  valuable.  Good  consideration  is  the 
natural  love  and  affection  of  near  relatives,  such  as  prompts 
the  bestowal  of  benefits.  Commercial  paper  based  upon 
such  consideration,  so  long  as  it  does  not  pass  into  the 
hands  of  a  holder  for  value,  cannot  be  sued  upon.  ^^ 

Valuable  consideration  however  is  anything  which  has 
a  pecuniary  or  monetary  value.  Not  necessarily  money  it- 
self, but  either  that  or  its  equivalent.  An  action  on  com- 
mercial paper  can  only  be  sustained  by  the  original  holder 
thereof,  when  it  is  based  upon  a  valuable  consideration.  -^ 

"  United  States  v.  Bank  of  Metropo-  consideration,  the  leslsons  on  Con- 

lis,  40  U.  S.,  393.  tracts.   Chapter   III — on   Consider- 

"  Harris  v.  Harris,  69  Ind.,  181.  ation. 
**  See,  generally,  as  to     validity     of 


DEPARTMENT  OF  LAW         23 
CHAPTER  ni. 

ACCEPTANCE   AND    INDORSEMENT. 

§24.  Acceptance  Generally. 

25.  What  Acceptance  Is. 

26.  How  Acceptance  is  Made, 

27.  Acceptance   Supra   Protest. 

28.  Effect  of  Acceptance. 

29.  Indorsement  Generally. 

30.  Kinds  of  Indorsement. 

(a)  In  Blank. 

(b)  Special. 

(c)  "Without  Recourse." 

(d)  Restrictive. 

(e)  Qualified  and  Conditional. 

31.  Indorsement  Rights  and  Liabilities. 

(a)  How  Established. 

(b)  Limit  and  Order  of  Liability. 

32.  Acceptance  and  Indorsement  of  Certain  Instruments. 

(a)  Checks. 

(b)  Bank  Notes. 

(c)  Certificates  of  Deposit.  ' 

(d)  Bonds  and  Coupons. 

(e)  Bills  of  Lading. 

§24.  Acceptance  Generally. — The  first  important 
step  in  the  life  of  a  bill  of  exchange  after  its  delivery  is 
its  presentment  for  acceptance.  This  must  not  be  con- 
founded with  presentment  for  payment  at  maturity.  The 
two  presentments  are  of  entirely  different  effect  and  play 
entirely  different  parts.  It  will  be  remembered,  that  both 
domestic  or  inland  as  well  as  foreign  bills  of  exchange  are 
drawn  on  some  person,  either  an  individual,  firm  or  cor- 
poration. It  then  becomes  the  duty  of  the  holder  of  the 
bill  to  promptly  present  it  for  acceptance  to  the  drawee; 
for  if  it  be  not  accepted,  it  is  then  dishonored.  Nor  has 
such  presentment  anything  to  do  with  indorsement,  both 
occupying  entirely  different  positions  and  having  a  lia- 
bility based  on  entirely  different  grounds. 

§25.  What  Acceptance  Is. — The  acceptance  of  a 
bill  is  the  agreement  on  the  part  of  the  drawee  to  pay  the 
bill  drawn  on  him  according  to  its  terms,  when  it  becomes 
due.  ^  There  is  no  liability  on  the  part  of  a  drawee  until 
he  has  agreed,  by  his  immediate  acceptance  or  by  a  previous 
agreement,  to  pay.  ^  As  has  been  said  it  is  the  duty  of  the 
holder  of  a  bill  to  promptly  present  it  to  the  drawee  for  ac- 
ceptance; if  he  fails  to  do  so,  he  not  only  loses  his  claim 

'Cox   V.    National    Bank,    100    U.    S./ Luff  v.  Pope,  5  Hill  (N.  Y.),  413. 
712. 


24         AMERICAN  EXTENSION  UNIVERSITY 

against  the  drawer,  but  against  all  other  parties — ^that 
is,  all  indorsers  and  transferrors — liable  on  the  bill.  ^ 

In  the  event  that  acceptance  of  a  bill  be  refused  and  it 
thus  becomes  dishonored,  it  should  be  protested  if  it  be  a 
foreign  bill.  In  all  cases,  in  the  event  of  a  dishonor,  notice 
thereof  is  required  to  be  given  to  all  parties  liable  on  the 
bill.  When  a  bill  is  presented  for  acceptance  the  drawee  is 
entitled  to  have  it  produced  for  his  examination,  and  a  rea- 
sonable time  to  allow  him  to  determine  whether  or  not  he 
will  accept  the  same.  *  When  a  bill  is  in  two  or  more  parts, 
as  we  have  seen  to  be  the  practice  regarding  foreign  bills 
of  exchange,  either  part  may  be  presented  and  the  drawee 
need  accept  only  one  of  them. 

§26.  How  Acceptance  Is  Made. — As  has  been  stated 
the  usual  form  of  acceptance  is  by  writing  the  word  ''ac- 
cepted" across  the  face  of  a  bill  together  with  the  signa- 
ture of  the  acceptor.  But  it  has  been  held  that  if  the  drawee 
simply  writes  his  name  across  the  face — or  even  on  'the 
back — of  a  bill,  it  is  an  acceptance.  ^  An  acceptor  should 
be  careful  in  accepting  a  bill  drawn  in  more  than  one  part, 
that  his  acceptance  be  not  placed  on  any  of  the  other  parts, 
for  if  he  should  do  so  and  the  accepted  parts  pass  into  the 
hands  of  different  bona  fide  holders  he  will  be  liable  on  each 
part  on  which  his  name  appears.  ^  While  there  may  be  an 
acceptance  by  parol,  i.  e.  not  by  writing  on  the  paper,  ^  the 
holder  of  paper  has  a  right  to  refuse  such  an  acceptance. 
It  is  now  however  the  general  rule  by  statute  that  written 
acceptance  is  required. 

If  a  bill  be  drawn  on  a  co-partnership  acceptance  by 
one  member  of  the  firm  will  be  binding  on  the  firm.  Should 
a  bill  be  drawn  on  a  member  of  a  firm  individually,  who  in 
accepting  it  uses  the  firm  name,  it  will  nevertheless  be  his 
individual  acceptance,  and  the  firm  will  not  be  liable.  * 
Care  must  be  taken  not  to  confound  a  bill  drawn  against 
two  or  more  persons  jointly,  who  are  not  co-partners,  and 
one  drawn  against  a  firm.  As  we  have  seen,  one  partner 
may  accept  for  the  firm  and  the  firm  will  be  bound;  in  the 

•Adams  V,  Boyd,  33  Ark.,  33.  ^  Joyce   v.   Wing  Yet   Lung,    87   Cal. 
*  Connelly  v.  McKean,  64  Pa.  St.,  113.  424. 

"Haines  v.  Nance,  52  111.  App.,  406.  'Nichols  v.  Diamond,  24  Eng.  Law  & 
•Bank  of  Pittsburg  v.  Neal,  63  U.  S.,  Eq.,  403. 

96. 


DEPARTMENT  OF  LAW  25 

other  instance  however  only  those  individuals  accepting  a 
bill  will  be  liable,  ®  and  as  against  those  not  accepting  it 
should  be  protested. 

Acceptance  may  also  be  made  after  a  bill  has  matured 
and  been  protested  for  non-payment,  and  in  such  a  case 
the  bill  is  regarded  as  payable  on  demand.  ^"  There  may  be 
a  qualified  or  conditional  acceptance  though  a  holder  is  al- 
ways entitled  to  an  absolute  and  unconditional  acceptance 
according  to  the  terms  of  the  bill. 

While  a  holder  has  the  option  of  refusing  a  conditional 
or  qualified  acceptance,  yet  if  he  accepts  it  his  duty  is  at 
once  to  notif 3^  the  drawer  and  all  prior  indorsers,  for  his  ac- 
ceptance of  a  conditional  or  qualified  acceptance  without 
their  consent,  discharges  them  from  liability  on  the 
paper.  ^^  "To  pay  when  goods  consigned  to  me  are  sold;'' 
**to  pay  as  remitted  for;  "to  pay  when  cargo  of  equal  value 
is  consigned  to  me,"  and  acceptances  payable  at  a  different 
time,  or  at  a  different  place  from  that  named  in  the  bill,  are 
examples  of  conditional  and  qualified  acceptances.  An  ac- 
ceptance "when  in  funds,"  or  words  of  similar  character, 
makes  the  drawee  liable  only  when  he  is  in  possession  of 
funds  from  which  he  is  authorized  to  pay  the  bill.  ^^ 

In  every  case  of  a  conditional  or  qualified  acceptance 
there  is  no  liability  until  the  performance  of  the  condition, 
or  the  happening  of  the  event  upon  which  the  promise  is 
predicated.  ^*  However  if  the  condition  or  qualification  set 
forth  be  rendered  impossible  by  the  act  of  God,  or  of  the 
law,  the  acceptor  is  thereby  discharged.  ^^ 

§27.  Acceptance  Supra  Protest. — Acceptance  supra 
protest,  or  acceptance  for  honor,  is  where  the  drawee 
named  in  a  bill  refuses  to  accept  it,  and  the  bill  has  been  pro- 
tested for  non-acceptance,  when  a  stranger  to  the  bill — that 
is  one  on  whom  it  is  not  drawn — intervenes  and  accepts  it 
for  the  honor  of  the  drawer  or  for  any  of  the  indorsers.  ^\ 
If  it  be  not  stated  for  whose  honor  the  bill  is  accepted  it  is 
presumed  to  be  for  the  honor  of  the  drawer.  While  accept- 
ance for  honor  is  a  conditional  acceptance  it  is  an  exception 
to  the  rule  requiring  the  consent  thereto  of  the  drawer  and 

'Smith  V.  Milton,  133  Mass.,  371.  Kfr.  "Marshall  v.  Clary,  44  Ga.,  513. 

"Stockwell  V.  Branble,  3  Ind.,  428.  ,,'  "  Everard  v.  Warner,  36  Minn.,  383. 
"Ford  V.  Angelrodt,  37  Mo.  50.  "  Rawson  v.  Beach,  13  R.  I.,  151. 

'=  Gibson  v.  Smith,  75  Ga.  33.  "Walton  v.  Williams,  44  Ala.,  347. 


26         AMERICAN  EXTENSION  UNIVERSITY 

the  previous  indorsers.  The  practice  in  such  cases  is  to 
make  this  kind  of  an  acceptance  before  a  notary  public, 
that  it  may  thus  be  clearly  established. 

When  a  bill  of  exchange  is  accepted  and  delivered  to 
the  holder,  it  is  irrevocable  even  though  the  holder  may  con- 
sent thereto,  for  it  is  well  settled  that  the  drawer  and  in- 
dorers  have  a  vested  interest  in  an  acceptance.  ^" 

§28.  Effect  of  Acceptance. — The  acceptance  of  a  bill 
admits  the  drawer's  signature  as  well  as  his  legal  capacity 
and  his  authority  to  make  the  bill.  ^^  The  drawee  also  by 
his  acceptance  admits  that  he  has  in  his  possession  funds  of 
the  drawer  to  pay  the  bill.  ^'■*  There  cannot  be  an  accept- 
ance in  the  legal  sense  of  the  term,  of  a  promissory  note  al- 
though frequently  when  a  note  is  made  payable  at  a  bank, 
the  bank  upon  presentation  issues  its  certificate  that  it  has 
funds  wherewith  to  pay  it.  This  however  is  virtually  a  cer- 
tification, and  not  an  acceptance,  for  it  imposes  upon  ,the 
bank  an  absolute  obligation  to  pay. "" 

In  the  case  of  a  written  premise  to  pay  a  non-existent 
bill — one  not  yet  drawn — there  has  been  considerable 
variance  of  judicial  decision.  The  position  however  taken 
by  Chief  Justice  Marshall  in  the  leading  ease  on  that  subject 
in  which  he  says  that  "a  letter  written  within  a  reasonable 
time  before  or  after  the  date  of  a  bill  of  exchange,  describing 
it  in  terms  not  to  be  mistaken,  and  promissing  to  accept  it, 
is,  if  shown  to  the  person  who  afterwards  takes  the  bill  on 
the  credit  of  the  letter,  a  virtual  acceptance,  binding  the 
person  who  makes  the  promise,"  ^^  has  been  followed  by  the 
best  authorities.  This  has  also  been  held  to  apply  to  like 
agreements  by  telegraph.  ^^ 

§29.  Indorsement  Generally. — It  should  also  be  borne 
in  mind  that  acceptance  and  indorsement  are  entirely  dis- 
tinct identities  legally,  and  that  the  liability  involved  is 
likewise  different.  It  must  be  understood  that  the  law 
affecting  indorsements  applies  to  bills  of  exchange,  notes, 

"Anderson  v.  First  Nat.  Bank,  1  Mc-  ="  Mead  v.  Merchants  Bank,  25  N.  Y., 

Crary,  252.  148. 

"Hoffman    v.    Milwaukee    Nat.    City  =' Coolidge  v.  Payteon,  15  U.  S.,  31. 

Bank,  79  U.  S.,  181.  '=  Central  Sav.  Bank  v.  Richards,  109 

"Heermance   v.    Morris,   101    N.    Y.,  Mass.,  414. 

63. 


DEPARTMENT  OF  LAW  27 

and,  in  fact  all  instruments  wherever  indorsement  is  per- 
mitted. In  all  such  cases  the  liability  of  the  indorser  is  in  a 
general  way  the  same. 

As  we  have  already  seen,  -^  an  indorsement  of  commer- 
cial paper  accompanied  by  its  delivery  is  virtually  the 
transfer  of  the  paper  by  one  party  to  another,  and  is  usually 
made  by  the  holder  writing  his  name  across  the  back  of  the 
instrument.  -*  An  indorsement  however  may  be  made  on  a 
separate  piece  of  paper  attached  to  the  instrument  itself, 
called  an  allonge, — meaning,  a  rider.  In  practice  an  allonge 
is  used  only  when  the  back  of  an  instrument  is  filled  with 
indorsements  and  space  is  required  for  more  indorsements. 

An  indorsement  is  not  only  the  transfer  of  the  paper 
and  an  undertaking  to  pay  it  upon  notice  of  its  dishonor, 
but  also  carries  with  it  a  warranty  as  to  title  thereto  in  the 
indorser,  and  as  to  its  genuineness  and  validity,  and  the 
legal  capacity  of  the  parties.  ^^ 

§30.  Kinds  of  Indorsement,  (a)  In  Blank. — Indorse- 
ment may  be  general  or  special;  in  blank,  or  in  full.  The 
usual  form  of  indorsement,  by  simply  writing  the  name 
across  the  back  of  the  paper,  is  termed  a  general  indorse- 
ment, or  an  indorsement  in  blank.  That  is  to  say  it  is  in- 
dorsed generally,  not  being  made  payable  to  any  designated 
person.  Under  such  an  indorsement  instruments  can  be 
passed  by  mere  delivery  from  one  party  to  another  without 
necessarily  being  indorsed  by  the  subsequent  holders.  While 
this  may  be  done  legally  it  is  customary  to  require  each 
transfer  or  tranferror  of  an  instrument  to  indorse  it,  so  as 
to  be  able  to  show  a  chain  of  title  in  the  instrument.  Fur- 
thermore, any  one  to  whom  paper  indorsed  generally — or 
in  blank — has  been  delivered,  may,  as  the  holder  of  the 
paper,  fill  in  the  blank  above  the  indorser 's  name,  making 
the  indorsement  special,  if  he  so  desires. 

(b)  Special. — An  indorsement  is  special,  or  in  full, 
when  it  designates  the  indorsee  by  name  or  otherwise,  such 
as.  "Pay  J.  L.,"  or,  "Pay  J.  L.  or  order; '^  or  "Pay  to  the 
order  of  J.  L.."  When  an  indorsement  is  special  or  in  full, 
the  paper  can  only  be  transferred  by  the  indorsement  of  the 

^'Ante,  §6  (b).  28;  Turnbull  v.  Bowyer,  40  N.  Y., 

=*Higgins  V.  Bullock,  66  111.,  39.  4.516. 

^  Kenworthy   v.    Sawyer,    125    Mass., 


28         AMERICAN  EXTENSION  UNIVERSITY 

person  named  therein.  Under  such  an  indorsement  the 
paper  cannot  legally  pass  by  mere  delivery.  ^®  In  order  to 
transfer  an  instrimient  with  all  its  original  incidents  as  to 
negotiability,  it  is  not  necessary,  where  there  is  a  special 
indorsement,  to  use  the  words  "or  order,"  to  make  the 
paper  further  negotiable.  These  words  are  required  only 
in  the  making  of  the  paper  and  an  instrument  originally 
negotiable  remains  so  irrespective  of  the  character  of  its 
indorsements,  ^^  unless  some  indorsement  specifically 
transfers  it  only  to  a  person  therein  named,  as  **Pay  to 
J.  D.  only." 

A  general  indorsement  or  indorsement  in  blank 
may  subsequently  be  made  special  by  any  indorser 
before  its  delivery  to  another  by  writing  above  his  name 
the  words  necessary  to  make  it  such.  In  a  similar  manner 
where  there  is  a  special  indorsement,  it  can  be  made  general 
by  the  indorser,  before  delivery.  ^*  Any  indorser  has  the 
right  to  enlarge  or  restrict  his  own  liability  previous'  to 
delivering  his  indorsed  paper  to  another. 

(c)  *  ^Without  Recourse. ' ' — An  indorsement  *  *  without 
recourse,"  is  where  the  indorser  exempts  himself  from 
liability  in  the  event  of  the  dishonor  of  the  paper.  Such 
an  indorsement  is  made  by  adding  to  the  signature  of  the 
indorser,  the  phrase,  ''without  recourse,"  or  other  words 
equivalent  thereto.  While  this  renders  such  an  indorser 
free  from  liability  to  pay  the  paper,  it  does  not  affect  the 
liability  of  the  maker  or  of  other  unrestricted  indorsers. 
An  indorsement  "without  recourse"  while  exempting  the 
indorser  from  liability  of  payment,  carries  with  it,  however, 
a  warranty  as  to  the  genuineness  of  the  paper,  the  indorsers 
right  to  transfer  it  and  that  the  previous  parties  are  legally 
competent. 

(d)  Restrictive. — A  restrictive  indorsement  is  where 
certain  terms  are  contained  in  the  paper  restricting  its  use. 
In  some  states  particular  words  are  required  for  this  pur- 
pose. Examples  of  restricted  indorsements  are,  "Pay  to  J. 
L.  only;"  "to  J.  L.  for  my  use;"  "for  my  account;"  "for 
account  of  J.  L. "  and  the  like.    While  such  an  indorsement 

"  Fawsett  v.   National  Life   Ins.   Co.,      ^  Fawsett   v.   National   Life   Ins.   Co., 
97  111.,  17.  supra. 


DEPARTMENT  OF  LAW  29 

remains  in   effect   it   destroys  the   negotiability   of    the 
paper.  ^® 

The  most  common  form  of  restrictive  indorsement  are 
the  words  "for  collection,"  frequently  placed  on  paper 
when  it  is  turned  over  to  a  bank  for  the  purpose  of 
collection.  The  legal  advantage  following  such  an  indorse- 
ment is  that  the  title  to  paper  so  indorsed  remains  in  the 
indorser — does  not  pass  to  the  bank,  in  other  words — so  that 
in  case  of  the  failure  of  a  collecting  bank  while  the  paper 
or  its  proceeds  is  in  its  hands,  the  indorser  can  prove  title 
thereto  and  claim  it.  "For  Deposit"  is  another  usual  form 
of  such  indorsement,  the  legal  effect  of  which  is  that  a  bank 
accepting  paper  so  indorsed  thereby  credits  the  depositor  at 
once  with  its  amount,  and  does  not  do  so  conditionally  upon 
its  being  collected. 

(e)  Qualified  and  Conditional. — A  qualified  indorse- 
is  one  where  the  indorser  restrains,  limits,  qualifies  or 
enlarges  his  liability  from  what  the  law  implies  to  be  his 
true  liability.  ^^ 

A  conditional  indorsement  is  one  that  is  made  upon  a 
condition,  either  to  give  effect  to  or  to  avoid  an  indorse- 
ment. It  may  be  either  a  condition  precedent  or  subse- 
quent, and  the  indorsement  is  not  binding  upon  the  indorser 
unless  the  condition  be  fulfilled.  ^^  To  illustrate :  "Pay  to 
J.  L.  or  order  provided  he  arrives  at  the  age  of  twenty-one 
years,"  is  an  indorsement  upon  a  condition  precedent. 
"Pay  to  J.  L.  or  order,  unless  before  maturity  I  notify 
you  to  the  contrary,"  is  an  indorsement  upon  a  condition 
subsequent. 

§31.  Indorsement  Rights  and  Liabilities,  (a)  How 
Established. — In  ever}^  case  before  legal  Uability  attaches 
to  an  indoser  there  must  be  a  delivery  of  the  paper  to  some 
transferee.  Such  delivery  need  not  necessarily  be  made  in 
person;  it  may  be  made  by  messenger  or  by  mail.  ^^  The 
law  of  the  place  where  an  indorsement  is  made  governs 
the  liability  of  the  indorser.  ^*    The  lawful  possession  of  a 

"Mechanics  Bank  v.  Valley  Packing  83. 

Co.,  4  Mo.,  200.  *•■=  Mendenhall  v.  Baylies,  47  Ind.,  577. 

**  Turley      v.      Hodge,      3       Humph.    .  '^  Canterbury  v.   Bank  of  Sparta,   91 

(Tenn.),  73.  Wis.,  57. 

**  Johnson   v.   Barrows,   12    La.   Ann.,      **  Moore  v.  Clopton,  22  Ark.,  125. 


30         AMERICAN  EXTENSION  UNIVERSITY 

negotiable  instrument  confers  on  the  holder  all  rights  and 
title  to  the  instrument,  but  mere  possession  without  legal 
title  is  not  sufficient.  ^"  A  forged  indorsement  passes  no 
title  to  paper;  and  forgery  is  committed  if  an  indorsement 
be  made  by  an  actual  person  bearing  the  same  name  as  the 
payee  or  indorsee  but  not  in  fact  the  party  in  interest.  ^® 

Power  to  indorse  may  be  delegated  to  an  agent,  and 
when  duly  authorized  he  has  all  the  legal  powers  of  his 
principal  for  that  purpose.  Such  authority  however  must 
be  expressl}^  conferred.  ^'  In  the  event  of  the  death  of  a 
party  to  an  instrument  his  executor  or  administrator  has 
power  to  indorse,  and  to  transfer  same.  ^^ 

While  indorsement  may  be  made  either  before  or  after 
the  maturity  of  an  instrument,  if  made  afterwards  a  holder 
so  receiving  it  takes  it  subject  to  all  the  defenses  and  equi- 
ties existing  between  the  original  or  any  previous  parties 
thereto,  as  distinguished  from  the  right  of  one  who  takes 
before  maturity  against  whom  no  such  defenses  are'  al- 
lowed. ^^  Although  in  order  to  pass  legal  title  to  paper  in- 
dorsement thereof  is  necessary,  the  equitable  title  may  be 
passed  by  mere  delivery  without  indorsement.  ^"  Where 
an  indorsement  is  omitted  by  accident,  mistake  or  fraud,  it 
may  be  compelled  by  proper  legal  action.  When  obtained 
the  liability  and  rights  of  such  an  indorsement  relate  back 
to  the  time  of  the  transfer  of  the  instrument.  ^^  An  instru- 
ment payable  to  two  or  more  persons  who  are  not  partners 
must  be  indorsed  by  all  of  them  in  order  to  pass  the  full  title 
thereto,  unless  one  is  authorized  to  sign  for  all  ^^  in  which 
event  he  must  sign  the  name  of  all  as  indorsers. 

An  indorsement  may  be  made  to  anyone,  even  to  per- 
sons laboring  under  legal  disability  such  as  infants,  insane 
persons  and  married  women.  *^ 

(b)  Limit  and  Order  of  Liability. — Where  an  in- 
dorser  desires  to  exempt  himself  from  full  liability  his  in- 

"  Andrews  V.  Bond,  16  Barb.  (N.  Y.),  238;    and    see   closing    paragraphs 

640.  of  §3,  ante. 

'"Beattie  v.  National  Bank,   174  111.,  ""Van  Riper  v.  Baldwin,  19  Hun.  (N. 

571.  Y.),  344. 

"Whitney  v.  Western  Stage  Co.,   20  *■  Southard  v.  Porter,  43  N.  H.,  379. 

Iowa,  554.  "  Rhyhlmer  v.  Fickert,  92  111.,  315. 

"Nellson    v.    Stallenwerck,    60    Ala.,  « Philliskirk  v.  Pluckwell,  2  M.  &  S., 

140.  393 

'•Cole    V.    Stearns,    46    N.    Y.    Supp., 


DEPARTMENT  OF  LAW  31 

tention  so  to  do  must  clearly  appear  from  the  indorsement 
itself,  otherwise  he  will  be  held  fully  responsible  as  an 
indorser.  A  firm  was  closing  up  its  business  and  was  suc- 
ceeded by  a  new  partnership  in  which  one  of  the  old  firm 
was  a  member.  This  party  indorsed  a  note  on  account  of 
the  old  firm,  thus:  "B.  &  H,  old  fir  min  liquidation '^  and 
signed  it.  In  an  action  against  him  as  indorser  it  was 
contended  by  him  that  the  indorsement  showed  that  it 
was  made  for  the  mere  purpose  of  transferring  title  to  the 
note,  but  the  court  held  that  this  position  could  not  be  sus- 
tained and  that  the  words  inserted  did  not  clearly  express 
an  intention  to  limit  his  personal  liability,  failing  in  which 
he  was  held  to  his  indorsement.  ^*  But  in  a  case  where 
an  indorsement  read,  '*Eor  value  received,  etc.  I  transfer 
unto  J.  P.  H.,  all  my  right  and  title  to  the  within  note,  to  be 
enjoyed  in  the  same  manner  as  may  have  been  by  me,"  the 
court  held  the  indorser  was  exempted  from  personal  lia- 
bility thereon,  as  the  indorsement  clearly  showed  that  he 
reserved  no  right  in  the  paper.  *^ 

Where  an  indorsement  read  "For  value  received  we 
guarantee  the  payment  of  the  within  note,  and  hereby 
waive  demand,  and  notice  of  non-payment,"  it  was  held,  that 
the  writing  constituted  an  indorsement  with  an  enlarged 
liability.  ^^ 

An  indorsement  cannot  be  for  less  than  the  full 
amount  of  the  instrument.  Hence  where  an  indorsement 
said:  "Pay  to  A.  P.  L.  or  order  Four  hundred  dollars 
out  of  this  note,"  the  court  held  such  indorsement  to  be 
void.  "*'  It  is  not  usual  to  date  an  indorsement,  but  in  the 
absence  of  a  date  it  is  presumed  to  have  been  made  before 
the  matiu-ity  of  the  paper.  *^ 

Wliere  there  are  several  successive  indorsements  the 
order  in  which  the  names  appear  on  the  paper  prima  facie 
represents  the  order  in  which  the  indorsements  were  made 
and  so  determines  the  order  of  liability  of  the  indorsers.  ^^ 
This  may  be  overcome  by  proof  of  an  arrangement  between 
the  parties  involving  a  different  order  of  liability.     In  the 

"Fassin  v.  Hubbard,  55  N.  Y.,  469.  "  Frank  v.  Kaigler,  36  Tex.,  305. 

"Hailey  V.  Falconer,  32  Ala.,  536.  **  Lewis    v.    Parker,    31    Eng.    Com. 

*•  Robinson  v.  Lair,  31  Iowa.,  14.  Law,  200. 
*'Rhinehart  v.  Schall,  69  Md.,  352. 


32         AMERICAN  EXTENSION  UNIVERSITY 

case  of  accommodation  paper  an  indorser  has  the  right  to 
rescind  his  obligation  and  is  entitled  to  the  cancellation  of 
the  instrument  at  any  time  before  it  is  negotiated.  ^^ 

§32.  Acceptance  and  Indorsement  of  Certain  Instru- 
ments.— (a)  Checks. — Checks  not  payable  to  bearer  or  to 
a  named  person  only,  whether  uncertified  or  certified  pass 
by  indorsement.  The  certification  of  a  check  has  been  said  to 
be  ** equivalent  to  an  acceptance,"  and  as  in  case  of  accept- 
ance makes  the  bank  the  principal  debtor.  ^^  There  is  no 
necessity  however  for  the  holder  to  present  a  check  for  ac- 
ceptance as  he  is  entitled  to  payment  on  demand  in  any 
event;  but  where  a  holder  desires  to  keep  a  check  in  circu- 
lation and  still  feel  assured  that  the  bank  will  pay  it  when 
presented,  the  practice  of  certification,  or  acceptance,  has 
now  become  quite  common. 

Acceptance  of  a  check  in  the  legal  sense  which  we  have 
been  using  it  in  this  lesson  is  not  contemplated  or  permis- 
sible in  law,  because  the  very  nature  of  a  check  precludes 
this  form  of  acceptance  for  the  reasons  already  given.  °^ 

(b)  Bank  Notes. — Bank  notes  and  government 
treasury  notes,  require  neither  acceptance  nor  indorsement. 
They  are  in  effect  money,  and  intended  to  be  used  as  such. 
They  pass  current  by  simple  delivery  because  of  the  char- 
acter of  their  source.  Indorsement  would  add  nothing  to 
their  value  or  security.  Being  payable  in  coin  on  demand 
they  require  no  acceptance  to  insure  redemption. 

(c)  Certificates  of  Deposit. — Certificates  of  deposit 
pass  by  indorsement  and  the  rights  and  liabilities  of  the 
parties  thereto  is  practically  the  same  as  in  the  case  of  notes, 
bills  of  exchange,  and  other  commercial  instruments.  ^^ 
There  is  the  important  characteristic  pertaining  to  these 
instruments  that  no  right  of  action  thereon  accrues  to  the 
holder  until  they  have  been  actually  presented  for  payment 
and  payment  demanded  and  refused.  ^^'  Being  issued  by 
banks  they  require  no  acceptance. 

"•Smith  Exer's.  v.  Wyckoff,  3  Sandf.  '  P  Poorman  v.  Mills  Co.,  35  Cal.,  118. 

Ch.  (N.  Y.),  89.  P  McGough   v.   Jamison,   107   Pa.   St., 

"Merchants  Bank  v.  State  Bank,  10  !      336. 

Wall.,  648.  ^""McGough   v.   Jamison,   107   Pa.   St., 

"See  §7,  Ante.  336. 

"  First  Nat'l  Bank  v.  Leach,  52  N.  Y.,  "  Morgan  v.  United  States,  113  U.  S., 

350.  491. 


DEPARTMENT  OF  LAW  33 

(d)  Bonds  and  Coupons. — Bonds,  and  coupons  when 
detached  from  their  bond,  also  pass  by  delivery  and  indorse- 
ments in  a  similar  way.  ^^  Acceptance  is  not  required 
thereof  as  they  are  the  undertaking  of  their  principal  obli- 
gors. The  legal  rules  applicable  to  indorsements  and  to  in- 
dorsers  of  other  negotiable  instruments,  apply  with  full 
force  and  effect  to  these. 

(e)  Bills  of  Lading. — Bills  of  lading  are  transferred 
by  indorsement  and  delivery  of  the  instrument,  and  pass 
whatever  title  to  the  goods  thereby  called  for,  that  the 
transferor  had  at  the  time.  ^^  There  is  however  this  impor- 
tant fact  to  be  kept  in  mind,  that  a  bill  of  lading  stands  for 
the  goods  only  during  their  transit  and  until  they  are 
delivered  to  the  person  entitled  to  them  as  therein  called 
for.  ^^  Mere  arrival  of  the  goods  at  the  point  of  destina- 
tion is  not  enough  to  prevent  a  bill  of  lading  from  being 
legally  transferred  by  indorsement.  This  can  be  done  up 
to  the  time  actual  delivery  thereof  to  the  consignee  takes 
place.  ^^ 

"  Misbouri    Pacific    R'wy    v.    Heiden-  P.,  38. 

heimer,  82  Tex.,  199.  »» Cairo  First  Nat.  Bank  v.   Crocker, 

"Meyerstein  v.  Barber,  L.   R.,   2   C.  Ill  Mass.,  163. 


QUIZZEE. 

CONSIDERATION 


l-§20.     Does  commercial  paper  require  a  consideration'? 

2-  To  what  parties  thereto  does  this  apply? 

3-  Would  the  consideration  for  the  making  of  a  note 

support  an  indorsement  after  delivery? 

4-  What  is  the  rule  as  to  seperate  consideration? 

5-  What  law  fixes  the  kind  of  consideration  neces- 

sary? 

6-  Must  the  consideration  equal  the  face  of  the  in- 

strument in  order  to  be  valid? 

7-  Is  buying  of  paper  below  its  face  value  taking  it 

out  of  the  usual  course? 

8-  Is  inadequacy  of  consideration  material? 

9-  State  the  exception  if  any. 

10-§21.     Is  the  loan  of  money  or  the  sale  and  delivery  of 
goods  a  good  consideration? 


34         AMERICAN  EXTENSION  UNIVERSITY 

11-  Does  this  apply  to  an  advance  of  money? 

12-  If  the  maker  of  an  instrument  requests  a  loan  or 

advance  to  a  third  person,  would  that  be  a 
good  consideration? 

13-  If  the  note  be  given  for  a  liability  incurred  at  the  time, 

but  payable  in  the  future,  is  there  good  consid- 
eration? 

14-  Is  a  note  given  to  secure  a  debt  possessed  of  a  good 

consideration? 

15-  If  a  note  be  given  by  a  person  to  extinguish  the 

debt  of  another,  is  there  a  good  consideration? 

16-  What  is  the  important  fact  to  be  considered  in  this 

class  of  cases? 

17-  Is  exchange  of  paper  a  good  consideration? 

18-  Must  the  exchanged  instruments  be  for  the  same 

amount? 

19-  Are  they  related  to  each  other  in  any  manner,  or 

under  any  circumstances  ? 

20-  Is  non-payment  of  the  obligation  under  any  cir'- 

cumstances  available  as  a  set-off? 

21-  Are  services  a  valuable  consideration? 

22-  What  nature  of  services  if  any  are  such  as  would 

be  considered  a  good  consideration? 

23-  Are  there  any  services  that  might  not  form  the 

basis  of  a  good  consideration? — if  so  name 
them. 

24-  Are  services  to  be  rendered  in  the  future  a  good 

consideration? 

25-  Are  services  without  a  pecuniary  character  a  good 

consideration? 

26-  Give  an  instance  of  such  a  case. 

27-  Is  an  obligation  given  as  a  subscription  to  an  edu- 

cational, benevolent  or  charitable  object  good 
under  any  circumstances — if  so,  when  ? 

28-  If  a  note  be  given  by  a  person  who  receives  aid 

from  a  relief  committee,  for  that  aid,  where 
the  fund  from  which  he  received  such  aid  was 
raised  for  the  express  purpose,  is  there  good 
consideration? 

29-  Can  a  parent  collect  on  a  note  given  by  his  child  to 

cover  an  advancement  to  him — and  why? 


DEPARTMENT  OF  LAW  35 

30-  Is  a  note  enforceable  against  the  maker  if  given  to 

equalize  an  interest  in  the  parent's  estate — and 
why? 

31-  Is  a  consideration  necessary  for  the  extension  of  a 

note? 

32-  Is  this  also  true  as  to  a  forbearance  to  sue  upon  if? 

33-  Is  part  payment  before  maturity  a  good  considera- 

tion for  forbearance  ? 

34-  How  as  to  a  payment  of  interest  in  advance  before 

maturity? 

35-  How  would  you  answer  the  two  foregoing  ques- 

tions if  the  facts  stated  in  them  occurred  after 
maturity  ? 

36-  Would  the  giving  of  new  security  for  the  extension 

or  forbearance  affect  it  in  any  way — if  so,  how? 

37-  Under  what  circumstances  if  any  would  an  agree- 

ment to  pay  an   overdue   note   create   a   new 
Hability? 
38- §22.     What  nature  of  agreements,  if  any,  are  of  such  a 
character  that  a  paper  if  given  against  them  are 
void  as  against  public  safety? 

39-  Would  a  note  given  for  the  purpose  of  facilitating 

a  divorce  be  good — and  why? 

40-  Would  a  note  which  was  given  to  violate  a  license 

law  be  good — and  why? 

41-  Give  an  instance  of  a  note  that  would  be  void  for 

want  of  consideration. 

42-  Is  there  an}^  distinction  between  the  case  of  a  note 

given  for  a  consideration  held  to  be  absolutely 
void,  and  one  held  void  by  the  courts — if  so, 
state  it? 

43-  What  is  the  rule  in  this  respect? 

44-  Between  whom  can  the  question  of  consideration 

be  raised  ? 

45-  What  proof  is  required  as  to  subsequent  holders? 
46-§23.     Into  what  classes  is  consideration  divided? 

47-  Define  ''good"  consideration. 

48-  Is  paper  based  upon  such  consideration  good,  and 

under  what  circumstances? 

49-  Define  ''valuable"  consideration — and  distinguish 

from  merely  "good"  consideration. 


36         AMERICAN  EXTENSION  UNFERSITY 

ACCEPTANCE    AND    ENDORSEMENT 

l-§24.    What  do  you  understand  to  be  the  first  thing  to 
be  done  upon  receipt  of  a  bill  of  exchange? 

2-  Is  there  any  difference  between  presentment  for 

acceptance  and  presentment  at  maturity — if  so 
state  same. 

3-  When  a  bill  is  presented  for  acceptance  and  not 

accepted,  what  then  becomes  its  legal  status  ? 
4-§25.    What  is  the  agreement  entered  into  upon  accep- 
tance ? 

5-  Is  there  any  liability  before  acceptance  ? 

6-  If  the  holder  fails  to  present  for  acceptance,  what 

is  the  legal  result? 

7-  If  a  bill  is  dishonored  what  is  incumbent  on  the 

holder? 

8-  Is  the  drawee  entitled  to  see  the  bill  before  ac- 

ceptance ? 

9-  Must  he  accept  or  refuse  same  immediately  on 

presentation? 

10-  In  the  case  of  a  foreign  bill  of  exchange  drawn  in 

triplicate,  is  it  sufficient  to  present  one  part  or 
must  all  be  presented? 

11-  Is  a  drawee  required  to  place  his  acceptance  on 

one  part,  or  must  he  place  it  on  all  of  them? 
12-§26.     How  is  acceptance  of  a  bill  usually  indicated? 

13-  Can  it  be  indicated  in  any  other  manner? 

14-  In  the  case  of  a  foreign  bill  of  exchange  where  the 

acceptor  writes  his  name  across  all  of  the  parts 
what  is  his  liability? 

15-  May  there  be  an  acceptance  by  parol? 

16-  Is  the  holder  bound  to  accept  such  parol  accep- 

tance if  it  is  offered? 

17-  If  a  bill  of  exchange  be  drawn  on  a  firm  and  ac- 

cepted by  one  member  of  the  firm  would  such 
acceptance  bind  the  firm? 

18-  In  the  case  of  a  bill  drawn  on  a  person  who  is  a 

member  of  a  firm,  and  in  accepting  it  he  uses  the 
firm  name,  who  will  be  liable? 

19-  Is  there  any  difference  as  to  acceptance  between 

a  bill  drawn  on  a  firm  and  one  drawn  against 
two  or  more  persons  jointly? — if  so  state  same. 


DEPARTMENT  OF  LAW  37 

20-  If  in  the  case  of  a  bill  being  drawn  against  two  or 

more  persons  jointly  all  of  them  do  not  accept, 
what  is  the  rule  as  to  liability,  both  as  to  those 
accepting  and  those  declining  to  do  so  ? 

21-  Can  a  bill  be  accepted  after  it  has  been  protested? 

22-  If  a  bill  be  accepted  when  is  it  payable  ? 

23-  May  there  be  a  qualified  or  conditional  accep- 

tance ? 

24-  Is  a  holder  bound  to  receive  such  an  acceptance? 

25-  If  such  an  acceptance  be  taken,  what  is  the  hold- 

er's duty  as  to  the  drawer  and  prior  indorsers? 

26-  If  such  conditional  or  qualified  acceptance  be 

taken  without  their  consent  how  is  their  lia- 
bility affected? 

27-  Give  an  example  of  a  conditional  or  qualified  ac- 

ceptance. 

28-  When  do  you  consider  the  drawee  becomes  liable 

if  his  acceptance  reads, ' '  when  in  funds  ? ' ' 

29-  What  is  necessary  in  order  to  fix  liability  in  the 

case  of  a  conditional  or  qualified  acceptance? 

30-  Are  there  any  conditions  under  which  such  ac- 

ceptances are  discharged  by  reason  of  the  hap- 
penings of  other  events — if  so  what  ? 
31-§27.     What  do  you  understand  by  acceptance  "supra 
protest?" 

32-  For  whose  account    may    such    acceptance    be 

made? 

33-  Is  there  ever  any  presumption  as  to  for  whom 

the  acceptance  is  made? — ^if  so  what? 

34-  What  kind  of  acceptance  would  you  term  an  ac- 

ceptance supra  protest? 

35-  Is  there  any  different  rule  to  be  followed  in  this, 

from  other  conditional  acceptances? 

36-  Before  whom  should  such  acceptance  be  made  ? 

37-  Can  an  acceptance  of  a  bill  of  exchange  be  re- 

voked— if  so  when? 
38-§28.    What  is  admitted  by  the  acceptance  of  a  bill? 

39-  Can  there  be  an  acceptance  of  a  promissory  note  ? 

40-  If  a  bank  accepts  a  note  there  pavable  what  is  its 

liability? 


38         AMERICAN  EXTENSION  UNIVERSITY 

41-  What  do  you  understand  the  rule  to  be  as  to  a 

promise  to  accept  a  non-existing  bill  of  ex- 
change ? 

42-  Does  this  rule  apply  to  promise  by  letters,  or  to 

any  other  mode  of  communication? 
43-§29.    In  your  opinion  is  acceptance  and  indorsement 
the  same? 

44-  Does  the  law  differ  as  to  the  liability  of  an  indor- 

ser  on  a  bill  of  exchange  from  an  indorser  on  a 
promissory  note? 

45-  What  is  an  indorsement  ? 

46-  Must  it  necessarily  be  on  the  instrument  itself? 

47-  If  not,  where  can  it  be  made  and  when,  and  what 

is  the  name  of  that  on  which  it  is  then  placed? 

48-  Do  you  understand  the  indorsement  to  be  any 

more  than  the  transfer  of  the  paper? 

49-  If  it  has  any  other  significance,  what  is  it? 

50-  Are  there  any  warranties  involved  in  an  indorser 

ment — if  so  name  them? 
51-§30.     Name  the  different  forms  of  indorsement. 
52- (a)      What  is  the  usual  form  of  indorsement  ? 

53-  What  kind  of  an  indorsement  is  that  called,  and 

what  is  its  effect  upon  the  instrument? 

54-  What  rights  as  to  an  indorsement,  has  one  to 

whom  paper  has  been  transferred  by  a  blank 
indorsement? 
55- (b)      What  is  a  special  indorsement  ? 

56-  Give  an  example  of  a  special  indorsement. 

57-  What  is  the  rule  as  to  transfer  when  the  paper 

has  a  special  indorsement  ? 

58-  Is  it  necessary  to  use  the  words  *'or  order,"  to 

make  an  instrument  with  a  special  indorse- 
ment, further  negotiable? 

59-  Can  a  general  indorser  make  his  endorsement 

special? 

60-  How  is  it  done? 

61-  Can  a  special  indorsement  be  made  general? 

62-  If  so,  by  what  method? 

63-  Give  the  reason  for  the  rule. 

64- (c)      Wliat  is  meant  by  an  indorsement  "without  re- 
course." 


DEPARTMENT  OF  LAW  39 

65-  What  is  the  effect  of  such  an  indorseemnt  on  the 

liability  of  the  party  making  it? 

66-  Has  such  an  indorsement  any  effect  on  the  liabil- 

ity of  the  maker  or  other  indorser? 
67- (d)      What  is  a  restrictive  indorsement? 

68-  Give  examples  of  such  an  endorsement  and  state 

their  legal  effect. 

69-  When  an  instrument  is  indorsed  "for  collection,'* 

what  kind  of  indorsement  is  it? 
70- (e)      What  is  a  qualified  indorsement? 

71-  Define  a  conditional  indorsement. 

72-  When  does   a  conditional   indorsement    become 

binding? 

73-  Give  an  example  of  an  indorsement  with  a  con- 

dition precedent. 

74-  Give  an  example  of  an  indorsement  with  a  con- 

dition subsequent. 

75-  Is    there    any    difference    as    to    the    warranty 

between  the  different  forms  of  indorsement — 

if  so  what  ? 
76-§31.    Is  an  indorser  liable  before  the  delivery  of  the 

instrument? 
77- (a)      Must  delivery  be  made  in  person — if  not  how 

otherwise  can  it  be  made? 

78-  What  law  governs  the  liability  of  an  indorser? 

79-  What  is  necessary  to  confer  title  and  the  posses- 

sion of  all  rights  to  the  holder  of  paper? 

80-  Is  mere  possession  sufficient? 

81-  Does  a  forged  indorsement  pass  title  ? 

82-  Can  power  to  indorse  be  delegated? 

83-  What  authority  would  such  agent  have  ? 

84-  Must  such  authorit.y  be  expressly  conferred  or 

may  it  be  presumed? 

85-  Has    an    administrator    or    executor   power   to 

endorse  ? 

86-  When  may  the  paper  be  indorsed? 

87-  What  is  the  difference  in  liability  between  an 

indorser  before  maturity  and  one  after  ma- 
turity? 

88-  How  can  the  equitable  title  to  an  instrument 

pass? 


40  AMERICAN  EXTENSION  UNIVERSITY 

89-  How  does  this  differ  from  the  maimer  in  which 

the  legal  title  passes'? 

90-  If  endorsement  is  omitted  are  there  any  cases  in 

which  it  may  legally  be  compelled? 

91-  What  are  the  cases  in  which  this  may  be  done  ? 

92-  When  indorsement  is  so  compelled,  to  what  time 

does  it  relate  ? 

93-  If  the  instrument  be  payable  to  two  or  more  who 

are  not  partners  by  whom  must  the  indorse- 
ment be  made? 

94-  Can  they  delegate  that  authority? 

95-  If  this  be  done  what  names  should  appear  on  the 

indorsement  ? 

96-  Can  a  paper  be  indorsed  to  a  person  laboring 

under  a  legal  disability? 
97- (b)      What  is  the  rule  where  an  indorser  seeks  to  ex- 
empt himself  from  liability  ? 

98-  Can  an  indorsement  be  for  less  than  the  whole 

amount  of  the  instrument? 

99-  Is  it  necessary  for  an  indorsement  to  bear  a  date? 

100-  What  is  the  rule  when  it  bears  no  date  ? 

101-  How  is  the  order  of  successive  indorsements  de- 

termined? 

102-  What  determines  the  order  of  liability  of  in- 

dorsers  ? 

103-  Can  this  be  overcome — if  so,  how? 

104-  Can  an  indorser  on  accommodation  paper  at  any 

time  rescind  his  obligation — if  so,  when? 
105-§32.    How  do  checks  pass  from  one  person  to  another? 
106- (a)      After  certification  of  a  check  what  is  the  position 

of  the  bank? 

107-  Is  the  holder  required  to  present  a  check  for  cer- 

tification in  order  to  make  the  bank  liable? 

108-  What  do  you  understand  to  be  the  purpose  of  cer- 

tification of  a  check? 

109-  Is  it  necessary  to  present  a  check  for  acceptance? 
110- (b)      Do  bank  notes  require  endorsement? 

111-  How  do  they  pass  current? 

112-  Why  is  indorsement  of  them  unnecessary? 

113-  Do  certificates  of  deposit  pass  by  indorsement? 


DEPARTMENT  OF  LAW  41 

114-  What  important  characteristic  is  there  as  regards 

liability  in  the  case  of  a  certificates  of  deposit  *? 

115- (d)  Do  bonds  and  their  coupons  pass  by  indorse- 
ment"? 

116-  Must  they  be  presented  for  " acceptance ?'' 

117-  What  rules  as   to  indorsement  are   applicable 

thereto? 
118- (e)      How  may  a  bill  of  lading  be  transferred? 

119-  What  title  thereto,  if  any,  passes  by  indorsement  ? 

120-  What  do  you  understand  a  bill  of  lading  to  stand 

for? 

121-  Can  a  bill  of  lading  be  transferred  after  delivery 

of  the  goods  it  calls  for? 

122-  Can  it  be  transferred  at  any  time  after  the  arrival 

of  the  goods  at  the  point  of  destination? 

123-  What  is  the  time  that  fixes  when  it  may  or  may 

not  be  transferred? 


42         AMERICAN  EXTENSION  UNIVERSITY 

LESSON  12.— 

CHAPTER  IV. 

TRANSFER. 

§33.  Method  of  Transfer. 
34.   Rights  of  Transferee. 

(a)  Generally. 

(b)  Holderb  in  Due  Course. 

(c)  Pledges  of  Commercial  Paper. 

§33.  Method  of  Transfer. — The  usual  method  of 
transferring  commercial  power  is  by  indorsement,  as  we 
have  already  seen.  There  are,  however,  some  instances 
where  a  transfer  may  be  by  delivery  without  indorsement, 
as  where  the  paper  is  payable  to  bearer  or  to  cash;  but 
otherwise  a  transfer  is  usually  by  indorsement.  Indorse- 
ment differs  from  the  ordinary  method  of  the  transfer  of 
choses  in  action  which  is  accomplished  by  assignment  there- 
of, and  whereby  the  assignee  takes  the  title  of  his  assignor 
with  all  its  infirmities.  In  the  transfer  of  commercial  paper 
by  indorsement  before  its  maturity,  however,  there  are 
many  instances  where  the  transferee  obtains  a  better  title 
even  than  his  transferror  had,  the  legal  effect  of  the  indorse- 
ment being  to  absolve  the  paper,  in  the  hands  of  a  bona  fide 
holder  for  value,  from  all  defenses  good  between  prior 
parties. 

An  assignment  not  being  an  indorsement  nor  in  any 
manner  legally  equivalent  thereto,  does  not  render  the  as- 
signor liable  to  his  assignee  nor  to  subsequent  holders  of  the 
paper  on  any  warranty  or  to  indemnify  the  holder  if  the 
maker  of  the  paper  dishonors  same.  ^ 

There  may  be  an  assignment  or  transfer  of  negotiable 
paper  as  with  any  ordinary  chose  in  action,  but  where  this 
occurs  it  is  done  by  a  separate  instrument  executed  for  that 
purpose,  and  as  already  stated  is  not  equivalent  to  an  in- 
dorsement. ^ 

A  transfer  by  assignment  unaccompanied  by  an  in- 
dorsement, is  subject  in  the  hands  of  the  assignee  to  de- 
fenses good  between  the  prior  parties,  ^  and  does  not  confer 
upon  the  assignee  the  rights   of  a   bona   fide  holder   for 

*De  Hass  v.  Roberts,  59  Fed.  Rep.,      ="  Osgood  v.  Hartt,  17  Fed.  Rep.,  575. 
856.  '  Osgood  V.  Hartt,  Id. 


DEPARTMENT  OF  LAW  43 

value.  *  One  who  takes  commercial  paper  by  an  assign- 
ment cannot  sue  thereon,  in  his  own  name,  but  must  bring 
action  in  the  name  of  the  original  party  for  his,  the  as- 
signee's, benefit — whereas  one  who  takes  by  indorsement 
before  maturity  can  sue  on  the  paper  in  his  own  name. 

An  instrument  is  deemed  overdue  when  payable  at  a  fixed 
time  and  upon  being  presented  for  pa.yment  on  that  day, 
during  business  hours,  is  not  paid.  Notice  of  such  non- 
payment must  be  given  to  the  indorsers  if  the  order  to  hold 
them  liable.  Where  an  instrument  is  payable  on  demand  or 
at  sight,  or  otherwise  no  specific  time  for  payment  is  therein 
stated,  it  must — in  the  absence  of  statutory  provision  di- 
recting otherwise — be  presented  within  a  reasonable  time 
after  its  issue. 

§34.  Rights  of  Transferees. — (a)  G-enerally. — There 
is  some  divergence  of  opinion  as  to  the  rights  of  a  person 
who  endorses  a  bill  to  another,  either  for  value  or  for  the 
purposes  of  collection,  and  again,  in  due  course,  comes  into 
possession  of  the  bill.  Some  hold  that  such  a  party  would 
acquire  additional  rights  as  a  subsequent  indorsee,  while 
others  maintain  the  contrary,  ^  holding  that  such  party  thus 
receives  such  paper  subject  to  all  defenses,  if  any,  that  were 
good  against  him  when  he  first  possessed  it. 

One  taking  a  bill  supra  protest  is  an  indorsee  for  value 
and  entitled  to  all  the  rights  and  remedies  of  an  indorsee  in 
due  course  against  those  liable  on  the  paper,  even  though 
no  formal  indorsement  or  transfer  is  made  to  him.  ^ 

A  transfer  of  paper  by  an  instrument  of  assignment 
while  not  placing  the  assignor  under  any  of  the  legal  obli- 
gations to  the  assignee  that  would  be  involved  had  the  trans- 
fer been  by  an  indorsement,  and  accordingly  not  giving  to 
the  assignee  the  legal  rights  that  he  would  have  acquired 
had  he  received  it  under  an  indorsement,  still  passes  title  to 
the  instrument  from  one  to  the  other.  An  instrument  that 
is  negotiable  and  not  due,  which  is  so  transferred,  cannot 
by  the  assignee  be  transferred  by  his  indorsement — the 
paper  lacking  the  indorsement  of  the  assignor.     In  other 

*  Hull  V.  Swarthout,    29    Mich.,    25;      '^  Dugan  v.    United    States,    3    Wheat 
Joseph  V.  Catron,     81     Pac.     Rep.  (U.  S.),  172. 

(N.  M.),  439.  «  Gazzam  v.  Armstrong,  33  Ky.,  554, 


44         AMERICAN  EXTENSION  UNIVERSITY 

words,  such  an  assignment  terminates  the  course  of  paper 
by  indorsement. 

(b)  Holders  in  Due  Course. — In  addition  to  what  has 
been  said  ^  as  to  the  rights  of  transferees  of  negotiable  paper 
it  may  be  added  that  to  be  a  holder  in  due  course,  so  as  to 
be  protected  from  equities  and  defenses  available  between 
antecedent  parties,  one  must,  himself,  or  through  someone 
through  whom  he  traces  title,  be  a  bona  fide  holder  for  value, 
before  maturity,  in  the  ordinary  course  of  business  and 
without  notice,  either  actual  or  constructive,  of  dishonor, 
fraud,  defect  of  title,  illegality  or  any  other  defense  that 
would  defeat  recovery  between  such  antecedent  parties.  ® 
as  they  follow,  and  are  a  part,  only,  of  the  legal  attributes 
of  an  indorsement. 

A  transfer  not  being  retrospective,  the  law  in  force  at 
the  time  of  the  transfer  is  what  governs.  A  transfer  is 
complete  upon  the  executing  of  the  indorsement  and  the 
delivery  of  the  paper  to  the  transferee. 

(c)  Pledges  of  Commercial  Paper. — A  pledge  of  com- 
mercial paper  as  collateral  or  otherwise,  does  not  in  general 
give  the  pledgee  power  to  sell  or  transfer  it,  until  the  failure 
of  the  pledgor  to  pay  the  original  debt.  ®  In  such  event 
notice  of  sale  is  required  to  be  given  to  the  pledgor.  The 
courts  have  gone  so  far  as  to  hold  that  such  a  sale  without 
such  notice  being  given  is  absolutely  void.  ^^  Furthermore 
such  pledgee  can  enforce  it  against  the  maker  of  the  paper 
only  to  the  extent  of  his  claim  against  the  pledgor — at  least 
\>here  the  maker  has  a  valid  defense  against  the  pledgor  on 
the  note.  ^^ 

'Ante  §31  (b).  jlil"' Evans     v.     Darlington,     5     Black. 

•Smith  V.  Livingston,  111  Mass.,  342— (Ind.),  320. 

"  Lewisby  v.  Varnum,  12  Abb.  Prac  ;,^^' Yellowstone  Nat.  Bk.  v.  Gaynor,  19 
(N.  Y.),  305.  £i,     Mont.,  403. 


DEPAETMENT  OF  LAW         45 
CHAPTER  V. 

RIGHTS  OF  THE  PARTIES. 

§35.   Holders  for  Value. 

36.  Extent  of  Rights. 

(a)  Before  Maturity  of  Paper. 

(b)  After  Maturity  of  Paper. 

37.  What  Constitutels  "Notice." 

(a)  Express. 

(b)  Constructive. 

(c)  Special  Forms  of  Notice. 

38.  Rights  of  Bank  Discounting  Paper. 

39.  Paper  as  Collateral  as  Affecting  Rights. 

40.  Order  of  Liability. 

41.  What  Constitutes  Cause  for  Enquiry. 

42.  Prima  Facie  Evidence  of  Title. 

43.  Negligence  in  Issuing  Paper. 

44.  Paper  Procured  by  Fraud. 

45.  Elstoppel,   When   Raised. 

46.  Rights  of  Holder  in  Special  Cases. 

§35.  Holders  for  Value. — A  holder,  as  we  have  seen  is 
one  legally  in  possession  of  commercial  paper  whether  as 
payee  or  indorsee,  or  if  payable  to  bearer,  the  bearer  there- 
of. A  holder  in  due  course — or  a  bona  fide  holder  for  value 
— ^is  one  who  can  trace  his  title  to  the  instrument  through 
one  who  received  it  in  like  manner,  and  wtihout  notice  of 
any  fraud,  defect  of  title,  illegality  or  other  defense  be- 
tween the  antecedent  parties,  and  who  is  accordingly  pro- 
tected from  all  equities  and  defenses  available  between  such 
antecedent  parties.  ^ 

Whether  one  is  a  bona  fide  holder  in  due  course  is 
largely  decided  by  whether  he  received  the  paper  in  good 
faith  without  collusion  with  any  antecedent  party.  The  early 
English  rule  was  that  where  a  holder  took  paper  under  cir- 
cumstances which  ought  to  have  excited  the  suspicion  of  a 
prudent  man,  he  was  not  a  legal  bona  fide  holder.  ^  This 
rule  was  later  modified  by  making  gross  negligence  on  his 
part  the  test  of  the  bona  fides  of  the  holder.  ^  The  law  how- 
ever today  is  as  laid  down  in  the  case  of  Smith  v.  Livings- 
ton, *  which  holds  that  the  true  question  is  not  whether 
there  were  suspicious  cii'cumstances  attending  the  transfer, 
but  whether  the  holder  took  it  without  actual  "otice  of  any 
infirmity  or  taint.  The  court  said,  ''This  rule  is  simple, 
easily  understood  and  acted  on,  and  in  conformity  with  the 
general  principles  of  commercial  law  which  protects  the  free 

'  Smith  V.  Livingston,  111  Mass.,  342.      '  Goodman  v.  Harvey,  31  E.  C.  L.,  212. 
=  Gill  V.  Cubitt,  10  E.  C.  L.,  154.  *  111  Mass.,  342. 


46         AMERICAN  EXTENSION  UNIVERSITY 

circulation  of  negotiable  paper.  The  other  rule  laid  down 
in  some  cases,  that  an  indorsee  for  value  cannot  recover  if  he 
takes  the  note  without  due  caution  or  under  circumstances 
which  ought  to  excite  the  suspicions  of  a  prudent  man  is  in- 
definite and  uncertain.  Circumstances  which  ought  to  ex- 
cite the  suspicion  of  one  ma"  might  not  attract  the  attention 
of  another." 

§36.    Extent  of  Rights.— (a)     Before  Maturity.— A 

bona  fide  holder  may  fill  in  a  blank  left  for  the  amount  in  a 
promissory  note,  with  the  sum  stated  in  the  margin,  unless 
it  was  left  by  mistake,  when  it  may  be  corrected  by  a  court 
of  equity.  ^  And  as  we  have  alread}^  learned,  ^  an  indorsee 
holding  under  a  blank  indorsement  may  fill  it  in  any  manner 
to  suit  his  wishes. 

Generally,  therefore,  one  holding  paper  received  before 
its  maturity  in  due  course  of  business,  for  value  given  there- 
fore and  without  notice  of  any  rights  or  equities  against  the 
paper  between  prior  parties,  has  the  legal  right  to  rely  im- 
plicitly and  alone  upon  what  the  paper  shows  on  its  face, 
and  is  legally  entitled  to  recover  thereon  the  full  face  there- 
of, plus  interest,  if  it  be  an  interest  bearing  instrument.  "^ 

But  a  transfer  of  commercial  paper  before  maturity  but 
without  indorsement,  passes  only  an  equitable  title,  and 
notice  thereafter  given  to  the  transferee  of  equities  between 
the  maker  and  the  payee,  will  make  the  transferee  subject 
thereto,  even  though  he  subsequently  obtains  an  actual  in- 
dorsement before  maturity.  ^ 

(b)  After  Maturity  of  Paper.— After  its  maturity 
commercial  paper  loses  its  negotiability  and  is  then  subject 
to  all  the  rights  and  defenses  arising  between  parties  thereto 
before  its  maturity.  ®  So,  an  accommodation  note  paid  at 
its  maturity  by  the  real  debtor,  although  he  was  not  a  party 
to  the  note,  cannot  thereafter  be  transferred  by  him  so  as 
to  give  it  validity  against  the  accommodation  makers  and 
indorsers.  ^^ 

§37.  What  Constitutes  "Notice."— (a)  Express.— 
Notice  as  used  in  connection  with  the  acquirement  of  com- 

'  Chestnut  v.  Chestnut,  104  Va.,  539.  » Y.  M.  C.  A.  Gym.  Co.  v.  Rockford 
'Ante  §29   (a).  Nat.  Bank,  179  111.,  599. 

'Williams  v.  Neely,  67  C.  C.  A.,  171.  "  Cottrell  v.  Watkins,   89  Va.,   801. 
*  Pavey  v.  Stauger,  45  La.  Am.,  353. 


DEPARTMENT  OF  LAW  47 

mercial  paper  is  not  necessarily  express  notice;  but  it  is 
knowledge,  or  the  means  of  knowledge,  to  which  a  party 
wilfully  shuts  his  eyes,  as  to  the  rights  and  defenses  against 
the  paper,  the  circumstances  of  which  defenses  must  be  of 
so  strong  a  character  as  to  put  him  upon  inquiry/^  And  it 
must  be  understood  that  a  purchaser  who  takes  an  instru- 
ment with  notice  of  equities  or  defenses  takes  subject  to 
them,  notwithstanding  the  fact  that  he  may  have  paid  full 
value  for  the  instrument.  ^^ 

(b)  Constructive. — Constructive  notice  arising  either 
from  the  appearance  of  the  paper  or  from  extrinsic  circum- 
stances may  be  legally  sufficient  to  put  a  purchaser  on  his 
guard.  For  example,  a  restrictive  indorsement,  or  a  memo- 
randa showing  non-acceptance,  or  the  refusal  of  a  bank  to 
discount,  or  any  other  fact  or  peculiarity  out  of  the  ordinary 
course  of  unembarrassed  commercial  paper,  as  should  put  a 
prudent  person  on  inquiry,  will  be  sufficient.  So,  too,  notice 
to  one  member  of  a  firm  will  charge  the  firm  as  such  on 
paper  which  it  acquires. 

(c)  Special  Forms  of  Notice. — Newspaper  notice  or 
report  of  alleged  facts  affecting  commercial  paper,  is  no 
notice  whatsoever,  legally,  to  a  purchaser  in  good  faith, 
unless  in  addition  thereto,  actual  notice  be  brought  home  to 
him.  "  In  all  of  the  transactions  spoken  of  herein,  notice 
to  an  agent  representing  another  is  notice  to  his  principal. 
.\nd  though  the  latter  receives  no  personal  notice,  due  no- 
tice to  his  agent  binds  him.  ^^ 

If  a  party  transfer  negotiable  paper  void  in  his  hands 
to  an  innocent  holder,  and  subsequently  again  comes  into 
its  possession  by  repurchase  or  otherwise,  he  is  still  affected 
with  the  original  knowledge  he  had  as  to  the  paper  and 
cannot  recover  from  prior  parties  thereon.  ^^ 

§38.  Rights  of  Bank  Discounting  Paper. — A  bank  dis- 
counting commercial  paper  for  one  of  its  customers  who  is 
not  in  its  debt,  and  giving  him  credit  on  its  books  for  the 
proceeds  thereof,  is  not  such  a  bona  fide  holder  for  value  as 
to  be  protected  against  any  equities  or  defenses  there  may 

"Greer  v.  Costi,  56  Mo.,  307.  "  Savingfe    Bank    v.    Schott,    135    111., 

"Crampton  v.  Perkins,  65  Md.,  22.  669. 

"Powell  V.  Waters,  8  Cowen  (N.  Y.),  "Central  Nat'l  Bank  v.  Valentine,  18 

669.  Hun.  (N.  Y.),  417. 
"  Clark  V.  Ricker,  14  N.  H..  44. 


48         AMERICAN  EXTENSION  UNIVERSITY 

be  against  the  paper  unless  some  other  consideration  passes. 
This  however  only  continues  while  the  deposit  is  not  drawn 
out.  for  nothing  has  been  actually  paid  or  parted  with  up 
to  that  point  and  is  a  mere  giving  of  naked  credit.  ^^  But 
if  before  receiving  notice  of  any  infirmity  of  the  paper,  the 
bank  should  pay  out  such  proceeds  on  the  check  of  the  de- 
positor, it  thereby  becomes  a  purchaser  for  value  and  is 
entitled  to  protection  as  such.  ^® 

§39.  Paper  as  Collateral  as  Affecting  Rights. — ^Where 
there  is  no  reference  in  an  instrument  itself  as  to  its  being 
issued  as  collateral  security  for  another  debt,  a  holder  in 
due  course  is  not  bound  to  inquire  whether  it  is  an  original 
or  a  collateral  indebtedness.  But  where  the  circumstances 
show  that  one  wilfully,  and  for  apparent  cause,  refrained 
from  making  inquiry  for  the  reason  that  he  did  not  desire  to 
become  acquainted  with  any  facts  against  the  merits  of  the 
paper,  he  is  then  not  a  holder  in  good  faith  without  notice.  ^* 

§40.  Order  of  Liability. — A  bona  fide  holder  who  takes 
paper  without  due  notice  of  any  defenses  has  the  right  to 
treat  the  parties  thereto  as  liable  to  him  in  the  order,  and  to 
the  extent,  they  appear  on  the  instrument.  Any  knowledge 
of  defenses  to  the  paper  acquired  by  him  subsequently  to  his 
becoming  the  holder  thereof,  in  no  way  affects  his  legal 
rights  as  a  bona  fide  holder.  ^^ 

§41.  What  Constitutes  Cause  for  Inquiry. — Where  a 
holder  acquires  paper  in  the  usual  course  of  business,  any- 
thing upon  its  face,  or  in  the  mode  of  its  transfer  to  him  that 
is  of  an  unusual  or  peculiar  character  is  sufficient  legally  to 
put  him  upon  inquiry.  He  therefore  under  such  circum- 
stances takes  it  at  his  peril  and  subject  to  all  equities  and 
defenses  between  the  original  parties.  ^^  Accordingly  if 
a  transferee  should  take  an  equitable  assignment  of  paper, 
not  at  the  time  in  the  possession  of  his  transferor,  he  would 
not  be  a  holder  in  due  course  of  trade. 

So,  too,  where  one  takes  overdue  negotiable  paper  he 
does  so  subject  to  all  defenses  and  equities.  This  is  true 
even  though  he  has  taken  it  without  notice  and  for  value; 

"Kost  V.  Bender,  25  Mich.,  515.  265. 

"Drellllng   v.    First    Nat.    Bank,    43  =' Colby  v.  Parker,  34  Neb.,  514;  see 

Kan.,  197.  also,  ante  §31  (b). 

"Schmueckle    v.    Waters,    125    Ind.,  ==' Roberts  v.  Hall,  37  Conn.,  2  05- 


DEPARTMENT  OF  LAW  49 

the  fact  that  the  paper  is  in  circulation  after  its  maturity 
being  of  itself  legally  sufficient  to  put  him  on  inquiry.  ^^ 
These  equities  are  those  growing  out  of  the  instrument 
itself;  as  to  collateral  matters  the  holder  takes  unaffected  by 
them.  ^^ 

§42.  Prima  Facie  Evidence  of  Title. — The  possession 
of  negotiable  paper  payable  to  bearer,  or  if  payable  other- 
wise, indorsed  in  blank  or  to  the  holder  specially,  is  prima 
facie  evidence  of  title.  Such  holder  is  presumed  to  have 
taken  it  in  good  faith  for  value  before  maturity  in  the  usual 
course  of  business  and  without  notice.  ^* 

Such  presumption  throws  the  burden  of  proving  that 
paper  is  defective,  upon  the  one  attacking  the  title  and  mak- 
ing the  defense  against  it.  If  it  be  shown  that  an  instru- 
ment was  lost  by,  or  was  stolen  from,  the  true  owner;  or 
that  it  is  tainted  with  fraud  or  illegality  in  its  inception;  or 
that  it  was  obtained  by  fraud  or  duress ;  such  presumption 
is  thereby  overcome.  The  holder  must  then  show  affirm- 
atively that  he  is  a  bona  fide  holder  for  value,  and  that  he  or 
someone  through  whom  he  traces  title,  took  the  paper  in 
good  faith  without  notice,  before  maturity,  and  in  the  usual 
course  of  business.  ^^ 

§43.  Negligence  in  Issuing  Paper. — Negotiable  paper 
even  though  originally  procured  by  fraud  may,  when  in  the 
hands  of  a  bona  fide  holder  for  value,  be  recovered  upon, 
unless  at  the  time  of  its  purchase,  it  was  absolutely  void. 
The  mere  fact  that  the  maker  did  not  intend  to  sign  such  a 
paper,  but  one  of  entirely  different  character,  is  of  no 
avail.  ^^  Where  the  maker  is  negligent  in  signing  an  instru- 
ment, a  bona  fide  holder  may  recover  thereon  no  matter  how 
gross  the  fraud  perpetrated  by  reason  of  such  negligence. 
The  reason  for  this  rule  is  that  where  one  of  two  innocent 
persons  must  suffer  by  the  act  of  a  third,  the  one  whose 
action,  negligence  or  omission  enabled  such  third  person  to 
occasion  the  loss  must  sustain  it.  ^'^ 

What  constitutes  such  negligence  is  a  question  to  be  de- 
termined by  a  jury  from  the  facts  and  circumstances  of  each 

="  Morgan  v.  Uinted  States,  113  U.  S.,  ^  Conant  v.  Johnson,  165  Mass.,  450. 

499.  "  Parkersburg  Bank  v.  Johnson,  22 
=°  National  Bank  v.    Texas,    20    Wall  W.  Va.,  520. 

(U.  S.),  72.  "Citizens  Bank  v.  Smith,  55  N.  H., 
"  Cook  V.  Norwood,  106  HI.,  562.  593. 


50         AMERICAN  EXTENSION  UNIVERSITY 

case;  **  although  when  a  particular  state  of  facts  is  either 
admitted  or  not  disputed,  the  question  whether  negligence 
existed  is  then  a  matter  of  law  for  the  court  to  determine. 

People  who  are  infirm,  decrepit,  aged  or  ignorant,  and 
whose  paper  is  in  circulation,  are  as  a  rule  defendants  in  this 
class  of  cases.  Whether  negligence  existed  in  their  action 
in  issuing  the  paper  rests  entirely  on  the  facts  of  the  case. 
But  where  a  person  possessing  ordinary  faculties  signs  an 
instrument  without  reading  it,  or  being  unable  to  read 
trusts  entirely  to  the  representations  of  a  stranger,  as  to  its 
contents,  he  has  no  legal  defense  to  the  instrument  in  the 
hands  of  a  bona  fide  holder.  ^^ 

§44.  Paper  Procured  by  Fraud. — There  is  a  class  of 
cases  however  where  no  commercial  instrument  of  any  kind 
was  ever  executed  and  yet  where  parties  are  sought  to  be 
held  as  upon  commercial  paper.  For  instance,  the  name 
of  a  person  may  be  signed  by  him  to  a  blank  piece  of  paper 
for  a  purpose  entirely  foreign  to  the  making  of  a  note,*  and 
which  was  afterward  filled  out  as  a  promissory  note,  circu- 
lated as  such  and  reached  the  hands  of  a  bona  fide  holder, 
for  value.  In  such  cases,  and  all  others  of  similar  character 
the  instrument  never  existed  in  contemplation  of  law  and 
no  recovery  can  be  had  thereon  even  in  the  hands  of  a  bona 
fide  holder.  ^" 

There  seems  to  be  a  distinction  between  this  class  of 
cases  and  those  depending  upon  whether  or  not  there  was 
any  confidence  reposed  by  the  signor  in  the  person  to  whom 
the  signature  was  given.  For  instance,  where  a  man  signed 
his  name  to  a  piece  of  paper  in  which  it  was  supposed  an 
evaporator  was  ordered  but  the  space  was  filled  by  the  party 
who  received  the  signature  by  framing  a  promissory  note;  ^^ 
or  where  one  signed  a  paper  the  blank  space  above  which 
was  to  be  filled  out  by  the  one  to  whom  he  entrusted  his 
signature  with  an  order  on  a  savings  bank,  but  instead  a 
promissory  note  was  written  in;  ^^  such  note  will  be  held 
good  in  the  hands  of  a  bona  fide  holder.  This,  on  the  prin- 
ciple above  stated  that  where  one  of  two  parties  must  suffer 

*  Becker  v.   Hart,  120  N.  Y.,  Supp.,  "McDonald  v.  Muscatine  Nat.  Bank, 

270.  27  Iowa,  319. 

»»Ort  V.  Fowler,  31  Kan.,  478.  "  Breckenridge  v.  Lewis,  84  Me.,  349 
'•Cline  V.  Guthrie,  42  Ind.,  227. 


DEPARTMENT  OF  LAW  51 

loss  from  a  wrong  he  whose  act  or  negligence  made  the 
wrong  possible,  must  bear  the  loss. 

On  the  same  principle  where  an  instrument  had  an  ex- 
istence, and  possession  thereof  was  obtained  through  the 
negligence  of  the  person  executing  it;  or  even  if  through 
his  negligence  it  was  materially  altered  prior  to  coming  into 
the  hands  of  a  bona  fide  holder,  such  holder  can  neverthe- 
less recover  thereon.  Furthermore  for  like  reason  if  a 
document  be  so  drawn  that  part  of  it  can  be  easily  detached, 
leaving  a  perfect  commercial  instrument,  the  latter  may  be 
recovered  on  in  the  hands  of  a  bona  fide  holder  for  value.  ^' 
And  where  an  instrument  contains  blanks  and  is  filled  up 
in  a  manner  even  amounting  to  a  fraud,  there  may  be  a 
recovery  on  it  in  the  hands  of  such  a  holder.  ^"^  All  of  which 
shows  that  one  must  be  careful  what  instruments  he  signs, 
or  he  may  well  pay  for  his  negligence. 

§45.  Estoppel,  When  Raised. — If  a  purchaser  however 
having  some  doubt  regarding  the  paper,  should  make  in- 
quiries concerning  it  before  purchasing,  and  receive  assur- 
ances of  its  genuineness  and  legality,  and  buys  it  relying 
upon  such  assurances,  those  giving  them  will  be  prevented 
from  thereafter  settina:  up  any  defense  against  such 
holder.  ^^  In  order  to  so  operate  however,  such  representa- 
tion must  be  made  after  the  execution  of  the  instrument, 
to  a  person  expecting  to  purchase  the  same,  and  he  must 
rely  on  its  truth.  But  the  fact  that  the  instrument  itself 
has  attached  to  it  a  statement  which  sets  forth  substantially 
the  same  facts  as  those  made  by  an  individual  answering 
inquiries,  has  been  held  hardly  sufficient.  ^^ 

§46.  Rights  of  Holders  in  Special  Cases. — The  mere 
fact  that  a  transferee  knows  that  paper  is  accomodation 
paper  does  not  prevent  him  from  being  a  bona  fide  holder. 
There  is  sufficient  consideration  therefor  if  value  is  paid  to 
the  party  for  whose  accomodation  the  instrument  was  exe- 
cuted and  negotiated.  ^'^  __ 

As  to  what  amount  is  recoverable  by  a  bona  fide  holder 
of  an  instrument,  void  as  between  the  parties,  it  is  settled 
that  only  such  sum  as  may  have  been  actually  paid  for  it 

'^  Brown  v.  Reed,  79  Pa.  St.,  370.  =' Jaqua  v.  Montgomery,  33  Ind.,  46. 

'*Ledwith  v.  McKim,  53  N.  Y.,  307.        "  Joneb  v.  Berryhill,  25  Iowa,  298. 
^Rudd  V.  Matthews,  79  Ky.,  479. 


52         AMERICAN  EXTENSION  UNIVERSITY 

by  the  holder  with  interest  thereon,  can  be  recovered  by 
him.  ^*  ; 

Where  an  instrument  is  held  by  a  person  who  holds  or 
indorses  it  in  an  official  or  fiduciary  capacity,  the  purchaser 
thereof  is  put  upon  his  inquiry  as  to  the  former's  authority, 
title  and  right  to  hold  and  to  transfer  the  paper.  ^^ 

It  is  well  settled  too,  that  a  holder  is  not  necessarily 
required  to  prove  that  he  paid  value  for  the  instrument  pro- 
vided it  is  established  that  his  predecessor  in  ownership  was 
such  a  purchaser.  In  other  words,  if  any  previous  holder 
was  a  bona  fide  holder,  the  present  holder,  without  showing 
that  he  himself  paid  value,  can  avail  himself  of  the  legal 
position  of  such  previous  holder.  ^^ 


CHAPTER  VI. 

LIABILITIES  OF  THE  PARTIES. 

§47.  Liability  of  Drawee  for  Non- Acceptance.  , 

48.  Effect  of  Acceptance. 

49.  Principal  Debtor  on  Note. 

50.  Admissions  of  Maker. 

51.  Acceptor  Supra  Protest. 

52.  Transferror  by  Delivery. 

53.  Contract  of  Indorsement. 

54.  Indorser    and    Surety    Distinguished. 

55.  Liability  on  Different  Forms  of  Indorsement. 

56.  Indorser    of   Non-Negotiable   Instruments. 

57.  Obligations  of  Indorser. 

58.  Order  of  Liability  of  Indorserfe. 

59.  Modification  of  Indorser's  Liability. 

(a)  In  General. 

(b)  Oral  Proof  Showing  Modification. 

60.  Liability  of  Irregular  Indorsers. 

61.  Agent  When  Considered  Party. 

§47.  Liability  of  Drawee  for  Non  Acceptance. — The 
drawee  of  a  bill  of  exchange  is  under  no  legal  obligation  to 
accept  it  unless  for  a  valuable  consideration  he  has  agreed 
to  do  so.  If  he  has  authorized  the  drawer  to  make  the  draft 
he  is  bound  to  accept  it,  if  it  is  drawn  substantially  as  au- 
thorized, and  if  all  conditions,  if  any,  expressed  in  the  au- 
thority so  given,  be  performed. 

Accordingly  where  a  drawee  for  a  valuable  considera- 
tion has,  either  expressly  or  impliedly,  promised  to  accept 

"Bain  v.  Gagnon,  19  Mont.,  402.  Bank,  47  N.  Y.  Supp.,  880. 

»•  Bank  of  Patterson  v.  Nat.  Broadway      "  Montclair  v.  Randall,  107  U.  S.,  159. 


DEPARTMENT  OF  LAW  53 

a  draft,  and  afterwards  refuses,  so  to  do,  he  becomes  liable 
for  such  breach.  ^ 

§48.  Effect  of  Acceptance. — ^A  promise  to  accept  will 
sometimes  be  implied  by  law,  from  the  relationship  of  the 
parties,  or  from  the  usages  of  trade.  ^  If  the  drawee  has 
money  in  hand  belonging  or  owing  to  the  drawer,  it  requires 
but  slight  evidence  as  to  previous  transactions  to  support 
such  a  presumption.  If  however  a  drawee  should  receive 
notice  of  the  bankruptcy  of  the  drawer  before  the  accept- 
ance, his  right  to  accept  is  thereby  revoked,  as  the  funds  in 
his  hands  are  no  longer  legally  available  for  the  payment 
of  the  bill,  but  are  subject  to  the  proceedings  in  bank- 
ruptcy. * 

Upon  the  acceptance  of  a  bill  the  acceptor  becomes  the 
principal  debtor  thereon,  and  is  the  party  primarily  and 
originally  liable  to  pay  the  bill.  The  drawer  and  indorsers 
are  merely  sureties,  liable  to  pay  only  upon  his  default.  An 
acceptor's  obligation  is  similar  to  that  of  the  maker  of  a 
promissory  note.  * 

By  his  acceptance  a  drawee  admits  everything  essen- 
tial to  the  validity  of  the  accepted  bill  and  warrants  to  a 
bona  fide  holder  that  every  essential,  necessary  to  the  crea- 
tion of  his  liability  exists.  ^  For  instance,  he  thereby  admits 
the  existence  of  the  drawer  and  cannot  afterwards  say  that 
he  is  a  fictitious  person,  or  that  he  was  dead  at  the  time  the 
bill  purports  to  have  been  drawn.  If  drawn  by  a  firm  he  ad- 
mits the  existence  of  such  a  firm.  So,  too,  by  his  acceptance, 
he  admits  the  genuineness  of  the  signature  of  the  drawer, 
that  of  the  payee,  or  of  any  subsequent  indorser.  *  He  does 
not  however  vouch  for  the  genuineness  of  the  body  of  the 
bill.  "^  He  admits  the  legal  capacity  of  the  drawer  of  the  bill, 
and  of  the  payee  to  indorse  it.  This,  however,  does  not  in- 
clude the  authority  of  the  payee  to  indorse,  but  simply  his 
legal  capacity  to  be  a  payee. 

An  acceptance  furthermore  raises  a  legal  presumption 
that  the  acceptor  has  funds  in  his  hands  to  pay  the  bill,  and 


^Riggs  V.  Lindsay,  11  U.  S.,  500. 

Ala.  558. 

*Helm  V.  Mayer,  30  La.  Ann.,  943. 

'  Jarvis  v.  Wilson,  46  Conn.,  90. 

» Citizens   Bank   v.    First   Nat.    Bank, 

«  Holt  V.  Ross,  54  N.  Y.,  475. 

6  Law  Rep.    (Eng.  &  Irish  App.), 

'  White  V.  Continental  Nat.  Bank,  64 

352. 

N.  Y.,   316. 

*  Capital  City  Ins.   Co.  v.   Quinn,   73 

54         AMERICAN  EXTENSION  UNIVERSITY 

such  presumption  is  conclusive  in  favor  of  a   bona  fide 
holder  of  the  bill,  for  value.  ® 

§49.  Principal  Debtor  on  Note.  —  The  maker  of  a 
promissory  note  is  the  primary  part}^  liable  thereon,  and 
where  there  are  two  or  more  makers,  their  liability  is  joint 
or  several  according  to  the  wording  of  the  note. 

§50.  Admissions  of  Maker. — The  maker  of  a  note 
thereby  admits  the  existence  of  the  payee,  and  if  payable 
to  a  firm  or  corporation  admits  their  legal  existence.  ®  He 
also  admits  the  existence  of  the  place  of  payment,^"  and 
where  payable  to  order,  admits  the  capacity  of  the  payee  to 
indorse.  ^^ 

§51.  Acceptor  Supra  Protest. — An  acceptor  supra 
protest  agrees  to  pay  the  bill  on  due  presentment  if  it  be  not 
paid  by  the  drawee,  provided  it  be  duly  presented  to  the 
latter  for  payment  and  protested  if  unpaid  and  that  he — 
such  acceptor — receive  notice  of  such  facts.  He  is  liable  to 
the  holder  and  to  all  parties  to  the  bill,  subsequent  to  the 
party  for  whose  honor  he  accepted  it.  ^^  An  acceptor  supra 
protest  is  bound  by  all  the  estoppels  which  are  binding  on 
the  ordinary  acceptor,  and  also  those  that  would  be  binding 
upon  the  party  for  whose  honor  he  accepts. 

§52.  Transferror  by  Delivery. — A  transferror  by  de- 
livery of  a  note  payable  to  bearer,  or  indorsed  in  blank,  in- 
curs no  liability  upon  the  instrument  and  is  not  responsible 
on  it  if  it  be  dishonored  at  maturity.  ^^ 

He,  however,  warrants  that  the  instrument  is  what  it 
purports  to  be;  that  it  is  a  valid  obligation;  that  the  parties 
have  legal  capacity;  and  that  there  is  no  defense  arising  out 
of  his  connection  with  the  instrument  which  may  render  it 
without  value.  He  is  liable  for  the  consideration  paid  him, 
if  it  fail  in  any  of  these  qualities.  ^'^ 

§53.  Contract  of  Indorsement. — Each  indorsement  of 
commercial  paper  is  a  separate  obligation,  and  a  new  and 

*  Kendall  v.  Galvin,  15  Me.,  131.  '-Salt  Springs  Bank  v.  Syracube  Sav- 
•Stoutimore  v.  Clark,  70  Mo.,  471.  ings  Instn.,  62  Barb.  (N.  Y.),  104. 

"  Brown  v.  First  Nat.  Bank,  103  Ala.,  "  May  v.  Dyer,  57  Ark.,  441. 

123.  "  Daskam  v.  Ullman,  74  Wis..  474. 
"Wolke  V.  Kuhne,  109  Ind.,  313. 


DEPARTMENT  OF  LAW  55 

independent  contract,  ^^  subject  to  the  law  of  the  place 
where  the  indorsement  is  made. 

If  a  transferror  put  his  name  on  the  back  of  a  paper 
payable  to  bearer,  or  which  is  indorsed  in  blank,  thereby 
making  the  instrument  transferable  by  delivery,  he  thereby 
becomes  liable  as  an  indorser.  An  unqualified  indorsement 
imports  first,  an  executed  contract  for  the  sale  and  transfer 
of  the  instrument,  and,  second,  an  executory  contract  which 
binds  the  indorser  to  the  assumption  of  a  future  contingent 
liability  in  respect  to  it, — in  other  words  to  pay  it  if  the 
maker  or  previous  indorser  does  not.  ^^  An  indorsement 
without  recourse  binds  the  indorser  only  to  the  first  of  these 
contracts. 

§54.  Indorser  and  Surety  Distinguished.  The  obliga- 
tion of  an  indorser  is  entirely  different  from  that  of  a  surety. 
The  obligation  of  a  surety  is  not  an  independent  contract, 
but  is  identical  with  that  of  the  maker;  and  such  defenses  as 
are  available  to  the  maker  inure  to  the  surety.  An  in- 
dorser's  obligation,  however,  being  a  new  contract,  is  sepa- 
rate and  apart  from  that  of  the  other  parties  to  the  paper, 
and  may  be  valid  and  subsisting  though  the  contracts  of  the 
other  parties  to  the  instrument  be  wholly  void.  ^^ 

§55.  Liability  on  Different  Forms  of  Indorsement. — 
A  qualified  indorsement,  no  matter  in  what  language  it  may 
be  expressed,  is  an  express  declaration  of  the  absence  of 
full  or  partial  responsibility,  the  operation  and  effect  of 
which  is  to  render  the  indorser  liable  merely  as  a 
transferror.  ^* 

If  a  payee,  or  indorser,  in  making  the  indorsement 
should  use  words  in  the  form  of  an  assignment  in  making 
the  transfer,  he  will  still  be  liable  as  an  indorser,  the  pur- 
ported assignment  being  treated  as  an  indorsement  unless 
containing  words  qualifying  it.  The  party  making  such  an 
indorsement  would  thereby  render  himself  liable  as  an  in- 
dorser and  not  as  an  assignor.  ^® 

Where  a  payee  makes  his  indorsement  in  the  form  of  a 
guaranty,  however,  he  is  liable  as  an  indorser  so  far  as  con- 

"  Sinker  v.  Fletcher,  61  Ind.,  276.  "  Hannum  v.  Richardson,  48  Vt.,  508. 

"Johnson  V.  Willard,  83  Wis.,  420.  '-Merrill  v.  Hurley,  62  N.    W.    Rep., 

"Bowman  v.  miler,  130  Mass.,  153.  958. 


56         AMERICAN  EXTENSION  UNIVERSITY 

cerns  the  transfer  of  the  instrument,  but  in  aU  other  re- 
spects is  held  as  a  guarantor.  ^^ 

§56.    Indorser  of  Non-Negotiable  Instrument. — The 

indorsement  of  a  non-negotiable  instrument  carries  with  it 
no  guaranty  of  its  payment.  It  is  merely  a  transfer  of  its 
legal  and  equitable  title,  unless  such  transfer  be  in  a  form 
from  which  the  intention  to  guarantee  may  be  inferred.  If 
he  induced  the  transferee  to  take  the  paper  by  an  agree- 
ment that  he  guarantees  its  payment,  he  is  then  held  upon 
his  express  or  implied  promise.  ^^ 

§57.  Obligations  of  Indorser. — An  indorser — other- 
wise a  vendor  or  transferror  of  commercial  paper  by  in- 
dorsement— is  liable  in  the  same  manner  as  a  transferror 
by  delivery,  although  the  transferror  by  delivery  is  liable 
only  to  his  immediate  transferee,  while  an  indorser  is  liable 
to  all  subsequent  bona  fide  holders. 

An  indorser  warrants  to  a  bona  fide  holder  that  the  in- 
strument is  a  vaHd  and  subsisting  obligation.  He  warrants 
the  legal  capacity  of  the  antecedent  parties;  that  the  sig- 
natures are  genuine;  and  the  legality  of  the  consideration 
moving  between  the  antecedent  parties.  ^^ 

Each  indorsement  of  an  instrument  being  equivalent  in 
law  to  the  drawing  of  a  new  bill,  the  indorser  engages  that, 
upon  being  duly  presented,  the  bill  will  be  accepted  or  paid 
according  to  its  terms,  and  that,  if  not  so  accepted  and  paid 
he  will  indemnify  the  holders,  provided  it  be  protested  for 
non-payment  and  proper  notice  be  given  him  of  such  dis- 
honor. Both  drawers  and  indorsers  therefore  are  condi- 
tional debtors  up  to  the  time  their  liability  becomes  fixed 
by  notice  of  dishonor,  by  the  drawee  or  the  maker,  when 
they  become  absolute  debtors,  to  either  of  whom  the  holder 
may  resort.  ^^ 

§58.  Order  of  Liability  of  Indorsers. — Indorsers  are 
as  a  rule  liable  to  each  other  in  the  order  in  which  their  in- 
dorsements successively  appear,  each  being  liable  to  all  suc- 
ceeding indorsers,  but  not  to  the  preceding  ones.  ^^  In  this 
respect,  a  drawer  is  legally  considered  the  first  indorser  on 

^VanSant  v.  Arnold,  31  Ga.,  210.  -'Cochran  v.  Atchison,  27  Kan.,  728. 

^Shafstall  v.  McDaniel,  152  Pa.  St.,       ="  Allen  v.  Chambers,  13  Wash.,  332. 
598.  ==*  Cogswell  v.  Hayden,  5  Oregon,  22. 


DEPAETMENT  OF  LAW  57 

a  bill.  This  order  of  liability,  however,  may  be  rebutted  by 
proof  of  the  actual  relation  of  the  parties,  or  by  an  express 
agreement  under  which  the  indorsements  were  made.  As  to 
its  bearing  upon  the  rights  of  a  bona  fide  holder  without 
notice,  no  such  agreement  would  be  admissible  to  control 
bis  rights.  ^^ 

§59.  Modification  of  Indorser's  Liability.  —  (a)  In 
General. — Between  the  immediate  parties  to  commercial 
paper  one  may  qualify  his  liability  as  he  may  think  fit.  If 
the  qualifying  terms  be  expressed  in  the  indorsement,  it  will 
control  such  liability  as  to  all  subsequent  indorsees.  And 
between  such  immediate  parties  an  indorser,  although  his 
indorsement  is  absolute,  may  qualify  it  by  a  contempora- 
neous agreement,  which,  however,  would  only  affect  the 
immediate  parties  to  the  agreement  and  not  subsequent 
indorsees.  ^^ 

(b)  Oral  Proof  Showing  Modification. — The  funda- 
mental principle  that  where  a  contract  has  been  reduced  to 
writing,  the  instrument  itself  is  the  best  evidence  of  the 
agreement  between  the  parties,  and  that  parol  evidence  of  a 
different  oral  understanding  affecting  same  is  inadmissible 
to  vary,  qualify  or  contradict  its  terms,  applies  to  negotiable 
instruments  with  full  effect.  The  applicability  of  this 
principle  to  the  contract  of  indorsement  depends  upon  how 
far  an  indorsement  is  to  be  considered  a  complete  written 
contract,  so  as  to  bring  the  case  within  its  operation.  The 
weight  of  authority  in  this  regard  is,  that  when  a  payee 
signs  his  name  across  the  back  of  an  instrument  for  the  pur- 
pose of  negotiation;  or  a  subsequent  holder  for  a  like  pur- 
pose writes  his  name  under  the  indorsement  of  the  payee, 
parol  evidence  would  be  inadmissible  to  show  that  his  con- 
tract was  other  than  that  of  an  indorser.  Therefore  it  can- 
not be  so  shown  that  he  intended  to  bind  himself  as  maker, 
surety  or  guarantor,  and  not  as  an  indorser;  or  that  the  in- 
dorsement was  a  qualified  one;  or  that  he  intended  to 
assume  no  liability  whatever.  In  fact  he  cannot  introduce 
any  evidence  to  prove  terms  or  conditions  other  than  those 
expressed  in  the  instrument,  or  in  his  indorsement  thereof, 
itself.  ^' 

""  Hill  V.  Shields,  81  No.  Car.,  251.  ^Johnson  v.  Glover,  121  Ul.,  283. 

"Davis  V.  Brown,  94  U.  S.,  424. 


58         AMERICAN  EXTENSION  UNIVERSITY 

It  is  competent,  however,  to  admit  parol  evidence  to 
impeach  the  consideration  or  delivery  of  an  instrument,  and 
an  indorser  may  so  show  as  to  his  immediate  indorsee,  that 
there  never  was  a  valid  delivery  of  the  instrument,  or  that 
there  was  a  conditional  delivery,  and  even  that  the  indorse- 
ment was  a  receipt  for  payment.  ^* 

§60.    Liability  of  Irregular  Indorsers. — The  relation 

and  liability  of  an  irregular  indorser  is  one  very  difficult  to 
define  in  general  terms.  His  relation  to  the  instrument  is 
anomalous.  His  liability  may  be  that  of  an  original  promi- 
sor, a  guarantor,  or  a  first  or  second  indorser,  depending  en- 
tirelj^  on  the  character  of  the  instrument  and  the  purpose 
for  which  it  was  made.  Evidence  is  admissible,  as  between 
the  immediate  parties,  to  show  the  actual  time  of  the  in- 
dorsement; ^^  but  the  nature  of  his  liability  is  a  matter 
that  can  only  be  determined  according  to  the  jurisdiction 
in  which  the  case  arises. 

§61.  Agent  When  Considered  Party. — If  a  broker  dis- 
closes his  agency  and  the  name  of  his  principal,  he  assumes 
no  personal  liability  in  the  transaction  of  making  or  in- 
dorsing paper  as  such  broker  or  agent.  Therefore  he  does 
not  in  such  cases  warrant  the  genuineness  or  value  of  the 
instrument  which  he  may  transfer  by  deliver3^  But  if  he 
suppresses  information  of  such  agency,  or  conceals  the  name 
of  his  principal,  and  accordingly  deals  with  the  purchaser 
as  being  himself  a  principal,  the  latter  may  hold  him  to  the 
liabilities  of  implied  warranty,  as  if  he  were  in  fact  the  prin- 
cipal. ^'^  A  broker  may  of  course  bind  himself  by  express 
warranty  where  he  has  disclosed  his  agency,  or  he  may 
exempt  himeslf  from  such  implied  warranties  by  an  express 
agreement. 

=«  stack  V.  Beach,  74  Ind..  571.  »"  Worthington  v.  Cowles,  112  Mass., 

"  Way  V.  Butterworth,  108  Mates.,  509.  30. 


QUIZZEE. 

TRANSFER. 


l-§33.       What  is  the  usual  method  of  transfer  of  coinmer- 

cial  paper? 
2-  How  may  paper  payable  to  bearer  be  transf -^rred  1 


DEPARTMENT  OF  LAW  59 

3-  What  is  the  difference  between  this  method  of 

transfer  and  that  by  assignment? 

4-  Is  an  assignment  equivalent  to  an  indorsement  *? 

5-  What  is  the  difference  as  to  liabihty? 

6-  Can  negotiable  paper  be  assigned, — if  so  how  is 

it  usually  done? 

7-  Is  an  assignment  without  indorsement  subject  to 

defenses'? 

8-  When  is  an  instrument  deemed  overdue? 

9-  If  no  specific  time  for  payment  be  stated  what  is 

the  rule? 
10-§34.      What  is  the  legal  status  of  one  who  indorses  paper 
(a)  to  another  and  later  in  due  course,  comes  again 

into  possession  of  it  ? 

11-  What  rights  has  an  acceptor  supra  protest? 

12-  Distinguish  between  the  rights  of  a  holder  under 

an  assignment,  and  those  under  an  indorsement. 

13-  Can  a  negotiable  instrument  that  is  assigned  be 

transferred  b,y  indorsement  by  the  assignee? 

14-  (b)        Who  is  a  holder  in  due  course  so  as  to  be  protected 

from  equities  and  defenses? 

15-  Is  a  transfer  retrospective  ? 

16-  What  law  governs  the  transfer? 

17-  When  is  the  transfer  complete  ? 

18-  What  is  the  rule  as  to  the  power  of  sale  and  trans- 

fer in  relation  to  pledged  paper? 

19-  Is  notice  of  such  sale  necessary  ? 


RIGHTS   OF   THE   PARTIES. 

l-§35.  What  is  meant  by  a  holder  in  due  course? 

2-  Is  good  faith  important  ? 

3-  What  is  the  rule  laid  down  in  Gill  v.  Cubitt? 

4-  How  was  this  rule  modified  ? 

5-§36.      What  is  the  present  law  on  the  subject? 
6- (a)        What  right  has  a  holder  to  fill  in  the  amount  left 
blank  in  paper? 

7-  What  reliance  may  a  holder  have  upon  paper  pur- 

chased in  due  course? 

8-  What  title  passes  where  paper  is  passed  without 

indorsement,    and    subsequently    the    holder 
learns  of  equities  against  the  paper? 


60         AMERICAN  EXTENSION  UNIVERSITY 

9-(b)       Wliat  rights,  if  any,  are  modified  where  paper  is 
acquired  after  its  maturity? 

10-  Can  accommodation  paper  to  which  the  one  ac- 

commodated was  not  a  party,  but  is  paid  by 
him  when  due,  be  transferred  by  him  against 
the  accommodation  parties'? 

ll-§37.      What  notice  of  equities  against  parties  is  suffi- 
(a)  cient  to  bind  a  purchaser? 

12-  Does  the  fact  that  a  purchaser  has  paid  value  for 

paper,  knowing  of  defenses  thereto,  give  him 
any  added  rights'? 

13- (b)        From  what  may  constructive  notice  arise  *? 

14-  Will  notice  to  one  of  a  firm  bind  the  firm? 

15- (c)  Is  information  had  from  newspaper  accounts 
legal  "notice"  of  facts  affecting  commercial 
paper? 

16-  What  can  you  say  as  to  the  sufficiency  of  notice 

given  to  one's  agent? 

17-  What  is  the  position  of  a  party  having  notice, 

who  transfers  the  paper  to  a  third  person,  and 
subsequently  again  comes  into  possession  of  it? 
18-§38.  Is  a  bank  which  discounts  paper  of  its  depositors 
and  gives  them  credit  for  the  amount  on  the 
books  a  bona  fide  holder? 

19-  Is  there  any  course  by  which  a  bank  may  attain 

such  relationship  to  such  paper — if  so,  how? 

20-  How  would  notice  of  an  infirmity  in  the  paper 

affect  the  bank? 
21-§39.      What  is  the  rule  as  to  the  necessity  of  inquiry 

whether  paper  is  given  as  collateral  security? 
22-§40.      What  is  the  order  of  liability  of  indorsers  to  a 

holder  of  paper? 
23-  Does  subsequent  knowledge  acquired  by  a  holder, 

of  equities  against  paper  have  any  effect  on  his 

rights? 
24-§41.      What  facts  should  put  a  transferee  upon  inquiry? 

25-  What  is  the  title  of  one  who  takes  paper  that  is 

overdue  ? 

26-  Does  the  fact  of  one 's  having  paid  value  for  paper 

and  having  no  notice  of  equity,  alter  the  case  ? 


DEPAETMENT  OF  LAW  61 

27-  Has  the  fact  that  the  paper  is  in  circulation  after 

being  overdue  anything  to  do  with  this — if  so, 
what? 

28-  Is  such  a  holder  affected  by  collateral  matters? 
29-§42.      What  is  necessary  to  confer  prima  facie  evidence 

of  title? 

30-  Is  there  any  further  presumption — if  so,  what  ? 

31-  What  is  the  effect  of  such  presumption? 

32-  Can  such  presumption  be  overthrown — if  so,  what 

must  be  shown? 

33-  What  is  the  holder  then  required  to  prove  af- 

firmatively? 
34-§43.      Can  a  note  procured  by  fraud  ever  be  recovered 
upon? 

35-  If  the  maker  should  prove  that  he  intended  to 

sign  a  paper  of  a  different  character,  would 
that  avail  him? 

36-  What  is  the  reason  for  this  rule? 

37-  How  is  the  question  of  negligence  in  putting  out 

negotiable  paper  determined? 

38-  When,  if  ever,  are  such  questions,    questions    of 

law? 

39-  When  does  such  negligence  rest  on  the  facts  of  the 

case? 

40-  When  is  it  no  defense  ? 

41-§44.  State  a  case  where  it  was  held  that  a  note  of  this 
class  could  not  be  recovered  upon  even  in  the 
hands  of  a  bona  fide  holder? 

42-  Give  an  instance  of  a  case  where  it  was  held  in 

this  class  of  cases,  that  there   could  be  a  re- 
covery? 

43-  Upon  what  ground  is  the  distinction  made   be- 

tween these  cases  ? 

44-  Can  a  paper  be  recovered  on  where  possession  of 

it  was  obtained  by  negligence  of  the  person 
making  it  ? 

45-  Would  the  fact  that  a  material  alteration  existed 

on  the  face  of  the  paper  make  any  difference? 

46-  If  an  instrument  was  surreptitiously  detached 

from  another  piece  of  paper  would  the  rights 
of  a  bona  fide  holder  be  affected? 


62         AMERICAN  EXTENSION  UNIVERSITY 

47-  If  an  instrument  showed  that  a  blank  therein  had 

been  filled  up  in  a  way  showing  fraud,  what 
would  be  the  position  of  such  a  bona  fide  holder? 

48-§45  If,  prior  to  the  purchase  of  a  paper,  inquiry  was 
made  as  to  the  instrument,  and  satisfactory  as- 
surances were  given,  how  would  such  assur- 
ances subsequently  affect  the  person  making 
them? 

49-  To  whom  must  such  assurances  be  given? 

50-  If  the  instrument  has  attached  thereto  a  state- 

ment giving  such  assurances  is  it  sufficient  ? 
51-§46.      What  effect  does  knowledge  that  paper  is  accom- 
modation paper  have  on  one  becoming  a  bona 
fide  holder? 

52-  What  can  be  the  recovery  on  the  part  of  a  bona 

fide  holder  in  the  case  of  an  instrument  void  be- 
tween the  parties  ? 

53-  If  a  paper  is  in  the  hands  of  one  holding  it,  in  a 

fiduciary  or  official  capacity,  is  the  person  who 
takes  it  bound  to  make  any  inquiry — if  so, 
what? 

54-  Must  a  holder  prove  he  paid  value  for  paper — if 

so,  when? 


LIABILITIES    OF    THE    PARTIES. 

l-§47.      When  is  the  drawee  of  a  bill  of  exchange  under 

legal  obligation  to  accept  it? 
2-§48.      When  will  a  promise  to  accept  a  bill  be  implied? 

3-  Will  the  bankruptcy  of  the  drawer  before  ac- 

ceptance, alter  the  case — if  so,  why? 

4-  Upon   acceptance   who    becomes   the    principal 

debtor? 

5-  What  then  is  the  position  of  the  drawer  and  the 

indorser? 

6-  What  is  admitted  by  virtue  of  an  acceptance? 

7-  What,  if  anything,  is  not  admitted? 

8-  Are  there  any  legal  presumptions  raised  by  an  ac- 

ceptance— if  so,  what? 
9-§49.      Who  is  the  principal  debtor  on  a  note? 
10-§50.      What  is  admitted  by  the  maker  of  a  note? 
11-§51.      What    is    the    liability    of    an    accepter    supra 

protest? 


DEPARTMENT  OF  LAW  63 

12-  By  what  is  such  an  acceptor  bound? 

13-§52.  What  is  the  liability  of  a  transferror  by  delivery? 

14-  What  are  his  warranties  ? 

15-  What  is  his  liability,  and  when,  if  paper  fails  in 

any  of  the  warranties  ? 
16-§53.      What  is  the  effect  of  the  contract  of  indorsement? 

17-  What  law  governs  the  indorsement? 

18-  What  effect  has  the  writing,  by  a  transferror,  of 

his  name  on  the  back  of  an  instrument  payable 
to  bearer? 

19-  What  contracts  are  implied  by  an  unqualified  in- 

dorsement ? 

20-  How  does  an  indorsement   "without   recourse'' 

differ  from  this? 
21-§54.      Is  the  obligation  of  a  surety  and  indorser  the 

same? 
22-  If  you  say  they  are  different  state  the  obligation 

of  each. 
23-§55.       What  is  the  effect  of  a  qualified  indorsement? 

24-  What  would  be  the  effect  of  using  words  of  as- 

signment in  making  a  transfer? 

25-  When  will  this  be  considered  a  qualified  indorse- 

ment? 

26-  What  would  be  the  effect  of  making  an  indorse- 

ment in  the  form  of  a  guaranty? 

27-§56.  What  effect  has  the  indorsement  of  a  non-nego- 
tiable instrument? 

28-  May  such  an  indorsement  be  a  guaranty — if  so, 

when? 

29- §57.  Is  the  liability  of  a  transferror  by  delivery,  any 
different  from  that  of  a  transferror  b}^  in- 
dorsement? State  to  whom  the  liability  of 
each  exists. 

30-  State  the  warranties  of  the  indorser  to  a  bona 

fide  holder. 

31-  What  is  the  agreement  implied  by  indorsement — 

and  why? 

32-  When — and  up  to  what  time — are  drawers  and  in- 

dorsers  only  conditional  debtors? 
33-§58.       State  the  order  of  liability  of  indorsers. 
34-  When  and  how  may  this  order  of  liability  be 

altered. 


64         AMERICAN  EXTENSION  UNIVERSITY 

35-  State  the  effect  of  an  agreement  altering  the 

order  of  liability. 

36-§59.  May  an  indorser's  liability  be  qualified — if  so, 
how? 

37- (a)  "Who  would  be  affected  by  such  qualification  if  it 
is  made  by  a  separate  contemporaneous  agree- 
ment? 

38- (b)  Does  the  general  rule  governing  proof  of  written 
contract  apply  to  negotiable  instruments  ? 

39-  State  the  rule  governing  proof  of  written  instru- 

ments. 

40-  How  far  does  such  rule  affect  the  contract  of  in- 

dorsement ? 

41-  What  is  the  weight  of  authority  on  this  point  ? 

42-  What  cannot  be  shown  by  parol  evidence? 

43-  For  what  purposes  may  parol  evidence  be  in- 

troduced? 

44- §60.  Define  the  relation  and  the  liabilities  of  irregu- 
lar indorsers. 

45-  What  may,  and  what  may  not,  be  proven  by 

parol  evidence  as  affecting  such  indorsers  ? 

46-§61.  Does  a  broker  or  agent  ever  assume  any  liability 
— if  so,  what  and  how? — state  fully. 


DEPARTMENT  OF  LAW  65 

LESSON  13.— 

CHAPTER  Vn. 

MATURITY. 

§62.   In  General. 

63.  When    Certain    Forms    Mature. 

64.  Maturity   of   Certain   Instruments. 

§62.  In  General. — The  question  as  to  the  time  of  the 
maturity  of  commercial  paper  arises  principally  when  deter- 
mining whether  an  action  thereon  has  been  prematurely 
brought ;  whether  an  action  is  barred  by  the  statute  of  limi- 
tations; whether  paper  was  duly  presented  for  payment, 
and  notice  of  dishonor  given  at  the  proper  time;  whether 
protest  was  made  prematurely  or  was  too  late;  whether  an 
instrument  was  transferred  before  its  maturity  so  as  to 
make  the  holder  a  bona  fide  purchaser  or  otherwise;  and 
whether  a  bill  was  prematurely  paid  by  an  accommodation 
acceptor  or  surety.  Substantially  the  same  legal  principles 
govern  the  question  of  maturity  in  all  cases  but  maturity  is 
determined  by  the  law  of  the  place  where  the  instrument  is 
payable. 

A  bill  or  note  in  terms  payable  on  a  fixed  day  or  in  a 
specified  number  of  days,  months  or  years  after  its  date, 
becomes  due  on  that  day.  Tender  of  payment  on  a  later 
day,  without  interest,  is  not  sufficient,  and  a  tender  before 
such  day  is  premature. 

§63.  When  Certain  Forms  Mature. — If  an  instrument 
be  payable  "on  or  before"  a  stated  date,  the  maker  has  the 
option  to  pay  it  before  the  time  so  fixed,  if  he  chooses.  It  is 
sometimes  a  valuable  privilege  to  do  this  in  the  saving  of 
interest  where  the  amount  involved  is  large,  or  when  the 
paying  of  the  indebtedness  may  help  other  business  trans- 
actions. While  paper  so  drawn  may  be  paid  at  any  time 
after  its  date  still  it  does  not  mature  and  payment  cannot 
be  compelled  until  the  expiration  of  the  stated  time.  The 
same  is  true  if  paper  reads  "by,"  or  "on  or  by"  a  certain 
time  or  date.  If  made  payable  "on  or  after"  a  fixed  date, 
it  is  due  any  time  on  demand  after  that  date  but  not  before. 

An  instrument  is  deemed  payable  on  demand  when  it 
is  so  expressed,  or  if  it  reads  "when  demanded"  or  "after 
date,"  or  "on  demand  after  date"  or  "at  sight"  or  "on  pre- 
sentation" or  words  of  similar  import.    The  fact  that  such 


66         AMERICAN  EXTENSION  UNIVERSITY 

an  instrument  contains  a  provision  for  interest  makes  it 
none  the  less  payable  on  demand.  ^ 

This  rule  as  to  maturity  applies  generally  where  no 
certain  time  of  payment  is  expressed  in  the  paper.  In  some 
cases  it  has  been  held  that  paper  payable  on  demand  is  not 
overdue,  so  as  to  affect  its  transfer,  making  one  a  purchaser 
or  transferee  after  maturity,  until  a  demand  of  payment  has 
actually  been  made.  The  weight  of  opinion  however  inclines 
to  the  rule  that  such  an  instrument  is  not  overdue  for  the 
purposes  of  transfer  until  after  the  lapse  of  a  reasonable 
time,  irrespective  of  whether  a  demand  has  been  made  or 
not.  ^  What  is  a  reasonable  time  must  be  determined  upon 
the  facts  of  each  particular  case. 

§64.  Maturity  of  Certain  Instruments.  —  As  has  been 
stated  a  check  unless  otherwise  expressed  therein,  or  is  post- 
dated, is  payable  immediately,  on  or  after  its  date.  A  check 
however  is  not  overdue,  as  affecting  its  transfer,  unless  there 
has  been  an  unreasonable  delay  in  presenting  it  so  that  the 
check  becomes  what  is  termed  a  stale  check.  The  rule  as  to 
determining  what  is  a  reasonable  time  applying  to  other 
forms  of  commercial  paper,  and  which  have  already  been 
stated,  pertains  also  to  checks. 

A  certificate  of  deposit  is  subject  substantially  to  the 
same  rules  as  a  promissory  note.  They  are  usually  payable 
on  demand,  and  are  so  payable  when  no  time  is  expressed 
therein.  ^ 

If  an  instrument  be  payable  in  installments  at  fixed 
times,  each  installment  becomes  due  at  the  time  specified, 
and  in  the  absence  of  an  express  provision  in  the  instrument, 
an  action  will  lie  only  for  the  installments  which  may  at  any 
time  become  or  be  due. 

An  instrument  payable  on  the  happing  of  a  contingency 
or  the  performance  of  a  condition,  will  become  due  for  all 
purposes  on  the  performance  of  the  condition  or  the  hap- 
pening of  the  contingency. 

An  instrument  though  payable  at  a  fixed  time  may  con- 
tain a  provision  that  will  cause  it  to  mature  earlier.  For 
instance,  the  provision  that  the  paper  may  become  due  at 
the  option  of  the  person  holding  it  in  the  event  of  some 

*Shaw  V.  Shaw,  43  N.  H.,  170.  Neb.  ,494. 

*Klrkwood     First     Nat'l     Bank,     40      » Beardsley  v.  Webber,  104  Mich.,  88. 


DEPARTMENT  OF  LAW  67 

default  of  the  payor,  other  than  in  the  payment  of  the  prin- 
cipal— as  in  the  case  of  a  default  in  the  payment  of  an  in- 
stallment, or  of  interest,  or  in  a  note  payable  in  installments 
that  the  whole  amount  shall  become  due  and  payable  on 
default  of  payment  of  any  of  the  installments.  ^  In  cases  of 
this  character  such  default  also  renders  the  paper  due  as 
respects  indorsers  and  guarantors  thereon. 

Where  such  option  exists  the  right  may  be  waived  or 
lost  by  an  unreasonable  delay  in  exercising  it,  by  an  agree- 
ment with  the  maker,  extending  the  time  of  payment,  or  by 
accepting  payment  after  default.  ^ 

So  in  a  deed  of  trust  or  mortgage  securing  notes  pay- 
able at  different  times,  a  provision  that  none  of  them  shall 
become  due  until  the  maturity  of  the  last  would,  so  far  as 
the  enforcement  by  law  is  concerned,  postpone  the  matur- 
ity of  all  of  the  notes  until  that  time. 

If  a  note  be  payable  with  interest,  such  interest  does  not 
become  due  until  the  note  is  due.  If  interest  be  payable 
annually,  with  the  option  on  the  part  of  the  holder  of  the 
instrument  to  make  it  a  part  of  the  principal  in  case  of 
default,  no  right  of  action  accrues  thereon,  until  the  prin- 
cipal becomes  due.  If  however,  interest  be  due  at  stated 
periods  without  further  provision  affecting  it,  it  is  due  at 
such  fixed  times  without  regard  to  the  maturity  of  the  prin- 
cipal debt,  although  the  holder  may  wait  until  the  principal 
becomes  due  before  demanding  payment  or  suing  therefor 
and  no  rights  will  be  lost  to  him  thereby.  ^ 

*  Heath  v.  Arhey,  96  Ga.,  438.  •  Nat'l  Bank    of    North    America    v. 

•Meson  v.  Luce,  116  Cal.,  236.  Kirby,   108   Mass.,   497. 


68         AMERICAN  EXTENSION  UNIVERSITY 

CHAPTER  Vni. 

PRESENTMENT. 

§65.  Necefesity  of  Presentment. 

66.  Presentment   for  Acceptance   Only,  Insufficient. 

67.  Presentment  to  Maker. 

68.  As  to  Guarantors. 

69.  Presentment    of    Collateral    Paper. 

70.  Who  Should  Make  Presentment 

71.  To  Whom  Presentment  Should  Be  Made. 

72.  Methods  of  Presentment. 

73.  Place  of  Presentment. 

74.  Time  of  Presentment. 

75.  Reckoning  of  Time. 

76.  Hour  of  Presentment. 

77.  Effect  of  Failure  to  Present. 

78.  Personal  Presentment. 

79.  Presentment  at  Address  of  Bill. 

§65.  Necessity  for  Presentment. — In  order  to  fix  the 
liability  of  the  drawer  of  a  bill,  the  indorser  of  a  note,  or  the 
acceptor  of  a  bill  for  honor,  it  is  necessary  to  show  that  legal 
presentment  of  the  bill  or  note,  and  demand  for  payment, 
was  made  by  the  holder  to  the  drawee  or  maker,  or  that 
there  was  the  exercise  of  due  diligence  for  the  purpose  of 
obtaining  payment.  ^  Presentment  for  payment,  in  the 
legal  sense,  includes  a  demand  for  its  payment. 

§66.    Presentment  for  Acceptance  Only,  InsuflBcient. — 

Where  a  bill  has  been  presented  for  acceptance  and  was 
duly  accepted  it  does  not  obviate  the  necessity  of  its  being 
presented  for  payment  according  to  its  terms.  If  a  holder 
neglects  so  to  do  he  loses  his  remedy  upon  the  bill.  How- 
ever, where  a  bill  has  been  presented  for  acceptance  and 
been  dishonored,  there  is  no  necessity  of  its  presentment 
for  payment,  except  in  the  case  of  a  bill  that  has  been  after- 
wards accepted  supra  protest.  ^ 

§67.  Presentment  to  Maker.  —  No  presentment  for 
payment  is  necessary  to  charge  the  maker  of  a  note,  or  the 
acceptor  of  a  bill.  In  the  case  of  a  note  payable  on  demand 
it  has  been  held  that  the  commencement  of  a  suit  thereon 
without  any  other  form  of  presentment  is  a  sufficient  de- 
mand. ^ 

§68.  As  to  Guarantors. — There  is  some  conflict  of  de- 
cision as  to  whether  it  is  necessary  to  present  paper  for 

'Harvey    v.    Girard    Bank,    119    Pa.      *  Adams  v.  Darby,  28  Mo.,  162. 
St.,  212.  »Bell  V.  Sackett,  28  Gal.,  409. 


DEPARTMENT  OF  LAW  69 

payment  to  the  maker  or  acceptor,  in  order  to  charge  a 
guarantor.  Some  jurisdictions  seem  to  hold  that  the  con- 
tract of  guaranty  is  an  absolute  unconditional  contract,  and 
so  makes  a  guarantor  liable,  in  case  of  the  default  of  the 
principal  debtor,  without  the  necessity  of  proving  a  demand 
upon  the  latter  for  payment.  ^  If,  however,  a  guarantor 
restrict  his  undertaking  a  different  rule  applies,  and  in  such 
a  case  presentment  becomes  necessary.  However  where  it 
appears  that  a  guarantor  suffered  damage  by  reason  of  the 
failure  of  the  holder  to  make  a  presentment  to  the  principal 
debtor,  he  would  be  discharged  to  the  extent  of  such 
damage.  ^ 

§69.  Presentment  of  Collateral  Paper. — Where  a  bill 
drawn  on  a  third  person  be  received  in  full  satisfaction  of  a 
debt  when  paid;  or  a  note  is  endorsed  to  a  holder  as  condi- 
tional payment  of  a  debt ;  the  person  so  receiving  it  assumes 
the  duty  of  its  presentment  to  the  maker  or  acceptor  for 
payment.  His  failure  to  do  so  not  only  wipes  out  his  remedy 
on  the  paper,  but  also  the  debt  for  which  it  was  given.  So, 
also,  where  paper  is  transferred  so  that  the  proceeds  may  be 
collected  and  applied  on  a  debt,  such  presentment  and  de- 
mand is  required  of  the  transferee,  and  if  he  be  guilty  of 
laches  in  this  regard,  he  must  sustain  the  loss.  ^ 

§70.  Who  Should  Make  Presentment. — Notes  and  in- 
land bills  of  exchange  are  presented  by  the  holder  or  his 
agent.  A  demand  by  a  notary  public  as  agent  is  sufficient. 
There  is  no  need  of  a  power  of  attorney  or  other  written 
instrument  to  prove  agency  for  that  purpose.  "^  The  per- 
sonal representative  of  a  deceased  party  may  make  the  pre- 
sentment, and  where  a  holder  has  become  bankrupt  or 
insolvent,  presentment  should  be  made  by  the  trustee  or 
assignee  in  the  insolvency  proceedings. 

In  the  case  of  a  foreign  bill,  however,  presentment 
should  be  made  by  a  notary  public  personally.  Presentment 
by  his  clerk  or  agent  will  not  be  sufficient.  ^ 

§71.  To  Whom  Presentment  Should  Be  Made. — Pre- 
sentment for  payment  should  be  made  to  the  acceptor  of  a 
bill,  or  to  the  maker  of  a  note,  or  to  the  authorized  agent  of 

♦Baker  v.  Kelly,  41  Miss.,  704.     See,  •  Minehart  v.  Handlin,  37  Ark.,  282. 

contra,      Newton      Wagon    Co.     t.  '  Seaver  v.  Lincoln,  38  Mass.,  269. 

Diers,  10  Neb.,  288.  *  Commercial  Bank  v.  Barksdale,  36 
"Burrows  v.   Zapp,   69   Tex.,   474.  Mo.,  563, 


70         AMERICAN  EXTENSION  UNIVERSITY 

either.  ®  Should  the  maker  of  the  note,  or  the  drawer  of  the 
biU,  be  deceased  at  the  time  of  the  maturity  of  the  paper, 
presentment  should  be  made  to  the  personal  representative 
of  the  deceased  if  there  be  one,  and  if  there  be  none,  it  should 
be  made  at  the  former  dwelling  place,  or  the  place  of  busi- 
ness of  the  deceased.  ^" 

Where  there  are  two  or  more  makers  who  are  not  part- 
ners, whether  the  liability  be  joint  or  several,  it  is  necessary 
that  presentment  be  made  to  each  in  order  to  charge  the 
drawer  or  indorser.  ^^  Where,  however,  there  are  two  or 
more  makers  or  acceptors  of  a  bill  of  exchange,  who  are 
partners,  presentment  to  one  of  them  will  be  sufficient.  This 
is  so  even  should  the  firm  be  subsequently  dissolved,  since 
it  wiU  still  be  considered  a  partnership  as  to  all  antecedent 
transactions.^^  In  the  case  however  of  one  partner  dying 
before  the  maturity  of  the  instrument,  presentment  should 
be  made  to  the  surviving  partner,  and  not  to  the  personal 
representative  of  the  deceased  partner.  ^^ 

§72.  Method  of  Presentment. — For  a  valid  present- 
ment and  demand  to  be  made,  the  person  doing  so  must  have 
the  bill  or  note  in  his  possession,  unless  special  circum- 
stances such  as  its  loss  or  destruction  are  shown  to  excuse 
its  absence.  ^^  The  reason  for  this  requirement  is  that  the 
acceptor  or  the  maker  may  judge  of  the  genuineness  of  the 
paper,  payment  of  which  is  demanded,  and  of  the  right  of 
the  holder  to  receive  payment;  as  well,  too,  that  the  payee 
may  obtain  immediate  possession  of  it  upon  paying  it. 
Where  paper  is  destroyed  or  lost,  the  presentment  of  a  copy 
with  an  offer  of  indemnity  against  the  original,  is  sufficient. 
The  demand  for  payment  must  be  according  to  the  terms  of 
the  instrument.  A  demand  therefore  for  payment  in  a  spe- 
cial kind  of  currency,  as  of  gold,  unless  it  is  so  specified  in 
the  instrument,  is  not  warranted.  ^^ 

§73.  Place  of  Presentment. — A  bill  or  note  payable  at 
a  designated  place  must  in  order  to  discharge  the  drawer  or 
indorser,  be  presented  for  payment  at  that  place.  ^*  If  it  be 
made  payable  in  a  city  or  town,  without  designating  any 

•Brown  v.  Turner,  15  Ala.,  832,  "Waring  v.  Betts,  90  Va.,  51. 

^•Philpott  V.  Bryant,  14  E.  C.  L.,  288.  "  Langenberger  v.   Kroeger,   48   Cal., 

"  Benedict  v.  Schmieg,  13  Wash.,  476.  148. 

"  Gates  V.  Beecher,  60  N.  Y.,  522.  "  Cox  v.   National  Bank,   100   U.   S, 

"Barlow   V.    Coggan,   1   Wash.   Ter.,  704. 
257. 


DEPARTMENT  OF  LAW  71 

in  Ms  possession  ready  to  receive  payment.  If  the  maker 
anywhere  in  the  specified  place  on  that  day  with  the  paper 
particular  place  therein,  it  will  be  sufficient  if  the  holder  be 
or  acceptor  however  has  a  place  of  business  or  residence  in 
the  designated  place  it  must  be  there  presented.  ^^ 

Presentment  and  demand  for  payment  at  the  place 
named  in  the  instrument  is  an  essential  part  of  the  contract 
so  far  as  indorsers  are  concerned,  and  it  is  important  as  well 
even  as  to  the  maker.  There  can  be  no  substitute  for  this 
necessity.  Even  previous  notice  that  the  paper  will  be  pre- 
sented elsewhere,  cannot  take  the  place  of  such  present- 
ment. ^^ 

When  payable  at  a  designated  place,  such  as  at  a  par- 
ticular bank,  formal  demand  there  is  not  necessary.  Hence 
if  such  a  bill  or  note  is  proved  to  be  at  the  designated  place 
on  the  date  of  its  maturity,  ready  to  be  given  up  if  paid,  it 
will  be  deemed  a  sufficient  demand.  ^^  The  mere  physical 
presence  at  such  place  of  the  instrument,  however,  without 
the  bank  having  knowledge  of  that  fact,  is  insufficient.  For 
instance,  where  a  letter  containing  a  bill  of  exchange  was 
laid  down,  with  other  papers  on  a  desk  in  the  office  of  an  offi- 
cial of  the  bank,  and  it  disappeared  without  his  having 
ever  seen  it,  the  court  held  that  there  was  no  sufficient 
presentment  and  demand.  ^° 

When  the  place  of  payment  is  specially  designated  in 
the  acceptance  of  a  bill,  it  must  be  presented  at  that  place  in 
order  to  make  the  drawer  or  the  indorser  liable,  even  though 
the  bill  be  addressed  to  a  different  place.  ^^  This  however  is 
with  the  proviso  that  the  designation  of  the  place  of  pay- 
ment in  the  acceptance  be  not  of  such  a  character  as  to  alter 
or  change  the  tenor  of  the  instrument.  -^ 

The  weight  of  authority  in  the  United  States  is  that  the 
designation  of  a  place  of  payment  in  a  note  does  not  make  it 
incumbent,  as  a  condition  precedent  to  create  an  obligation 
by  the  maker  of  the  note,  that  it  should  be  presented  at  that 
particular  place  for  payment. 

If  no  place  of  payment  be  named  in  an  instrument  then 
it  must  be  presented  for  payment  at  the  usual  and  principal 

"Meyer  v.  Hibsher,  47  N.  Y.,  265.  "Troy  City  Bank  v.  Lauman,  19 
"Parker  v.  Stroud,  98  N.  Y.,  383.  N.   Y.,   477. 

"People's  Bank  v.  Brooks,  31  Md.,  7.  ^Niagara  Bank  v.  Falrman,  31 
"•Chicopee     Bank     v.      Philadelphia  Barb.    (N.  Y.),  403. 

Bank,   75   U.   S.,   641. 


72         AMERICAN  EXTENSION  UNIVERSITY 

place  of  business  of  the  maker,  or  the  acceptor,  during  busi- 
ness hours ;  or  if  he  has  no  established  place  of  business, 
then  at  his  residence,  during  reasonable  waking  hours. 

§74.  Time  of  Presentment. — Where  an  instrument  is 
payable  on  a  day  certain,  in  order  to  legally  charge  the 
drawer  or  the  indorser,  it  should  be  presented  on  the  day  of 
its  maturity  during  reasonable  hours.  Presentment  a  day 
bef ore,^^  or  a  day  after,^^  maturity  is  not  sufficient. 

When  no  certain  day  is  specified  an  instrument  should 
be  presented  within  a  reasonable  time  after  its  date.  What 
is  a  reasonable  time  must  be  judged  in  all  cases  from  the 
circumstances  of  the  case  and  the  situation  of  the  parties. 
This  rule  also  applies  to  sight  drafts.  It  is  impracticable 
to  lay  down  any  specific  rule  by  which  the  question  of  what 
is  a  reasonable  time  can  be  measured  in  every  case.  In  the 
event  of  a  bill  or  note  being  indorsed  after  maturity  it  is  as 
if  a  new  bill  were  drawn  payable  at  sight,  and  therefore  to 
charge  the  indorser,  presentment  should  be  made  within  a 
reasonable  time.  The  same  rule  as  to  what  is  a  reasonable 
time  applies  in  such  instances  as  in  the  case  of  other  paper 
payable  on  no  specified  day.  ^^  However,  where  an  instru- 
ment is  transmitted  by  mail  for  payment  and  is  by  mistake 
of  the  postal  authorities  delayed,  such  as  the  misdirection 
of  a  package  of  mail  matter  by  a  postmaster — such  delay 
wiU  be  excused;^**  but  in  all  such  cases  presentment  must  be 
made  within  a  reasonable  time  thereafter.  ^^ 

§75.  Reckoning  of  Time. — The  day  of  the  date  or  of 
the  sight  of  paper  is  to  be  excluded  in  reckoning  time  when 
a  bill  or  note  is  made  due  a  certain  number  of  days  after  its 
date,  or  after  sight.  ^^  If  it  be  due  on  a  Sunday  or  legal  holi- 
day, presentment  should  be  made  on  the  day  preceding.  ^® 
In  the  states  where  the  legislature  has  provided  for  a  Satur- 
day half  holiday,  presentment  may  be  made  up  to  noon  of 
that  day,  or  subsequently,  as  may  be  provided  by  statute.  ^^ 

A  month,  according  to  the  custom  of  merchants,  is  a 
calendar  month,  and  not  a  lunar  month.  So,  when  an  instru- 
ment is  dated  on  a  day  in  any  month  and  payable  in  a  speci- 

»  Robinson  v.  Blen,  20  Me.,  109.  Conn.,    401. 

"Davis  V.  Herrick,  6  Ohiio,  75,  ''Burden  v.  Smith,  44  Miss.,  548. 

"Union  Bank  v.     Ezell,     10     Hump.  =®  Henry   v.   Jones,    8   Mass.,   452. 

(Tenn.),    385.  ^Barlow  v.  Gregory,  31  Conn.,  261. 

"Windham     Bank     v.     Norton,     22  'o  Sylvester  v.  Crohan,  138  N.  Y.,  494. 


DEPARTMENT  OF  LAW  73 

fied  number  of  months  from  that  date,  it  becomes  due  on 
the  same  day  of  the  month  in  the  stipulated  number  of 
months  afterward,^ ^  irrespective  of  the  number  of  days  in 
the  intervening  months.  A  note  that  would,  under  this  rule, 
become  due  on  the  29th,  30th  or  31st  of  February,  because 
dated  on  a  corresponding  date  in  some  preceding  month 
and  made  payable  a  stated  number  of  months  thereafter, 
will  be  due  on  February  28th,  except  in  leap  years  when  it 
will  mature  on  the  29th. 

Where  however  a  bill  or  note  is  undated  the  time  of 
maturity  will  be  reckoned  from  the  date  of  its  delivery,  that 
being  then  presumed  to  be  the  date  of  its  execution. 

§76.  Hour  of  Presentment. — Where  an  instrument  is 
made  payable  at  a  bank  it  should  be  presented  during  the 
usual  business  hours  of  the  bank,  and  paper  payable  at  a 
place  of  business  should  be  presented  during  usual  business 
hours  of  such  business.  If  paper  is  to  be  presented  at  the 
payor's  residence  it  may,  as  already  stated,  be  presented 
at  any  time  of  the  day  down  to  the  ordinary  hours  of  rest  in 
the  evening.  ^^ 

§77.  Effect  of  Failure  to  Present.— The  effect  of  a  fail- 
ure to  make  such  presentment  would  not  be  to  relieve  a 
maker  from  his  promise  to  pay  as  agreed,  but  only  to  relieve 
him  from  damages  resulting  from  such  failure,  if  he  was 
ready  at  the  appointed  time  and  place  to  pay  his  obligation 
and  there  was  no  one  there  to  receive  the  money.  A  plea  of 
this  fact  in  a  suit  upon  an  instrument,  and  payment  into 
court  of  the  amount  due  thereon,  will  be  a  bar  to  a  recovery 
from  him  of  interest  and  costs,  but  it  will  be  no  bar  to  the 
cause  of  action  itself.  ^^  It  has  however  been  held  that 
where  a  note  is  made  payable  at  a  bank  and  no  presentment 
was  duly  made,  if  the  maker  sustain  damage  thereby  he  is 
relieved  from  all  liability.  ^* 

How  far  this  would  apply  to  demand  notes  depends 
upon  the  law  of  the  jurisdiction  in  which  the  question  arises, 
as  there  is  a  wide  divergence  of  judicial  opinion  as  affecting 
paper  of  this  class. 

The  parties  may  agree  orally  upon  the  place  of  payment 

"  McMurchey  v.   Robinson,   10   Ohio,      "Montgomery  v.  Tutt,  11  Cal.,  317. 

496.  **  Lazier   v.    Horan,    55    low^a,    75. 

'*  Farnsworth  v.  Allen,  4  Gray,  435. 


74         AMERICAN  EXTENSION  UNIVERSITY 

where  no  such  place  is  mentioned  in  an  instrument,  and  the 
effect  of  this  would  be  to  make  a  demand  for  payment  at 
that  place  sufficient  to  bind  a  drawer  or  indorser.  ^^  Where 
no  place  of  payment  be  designated  or  agreed  upon,  demand 
should  be  made  on  the  acceptor,  or  the  drawer  as  the  case 
may  be,  at  his  residence  or  place  of  business,  to  charge  the 
drawer  or  indorser,  and  where  such  party  has  no  place  of 
business,  it  should  be  made  at  his  residence.  ^^ 

In  order  to  be  deemed  a  place  of  business  it  must  not  be 
a  place  used  temporarily  by  the  person  for  the  transaction 
of  some  particular  business,  but  his  regular  and  known  place 
of  business  for  the  conducting  of  money  transactions; 
though  an  office  where  one  receives  business  callers  and 
where  it  appears  that  he  had  no  other  known  place  of  busi- 
ness would  be  a  proper  place  for  the  making  of  a  demand.  ^^ 

§78.  Personal  Presentment. — If  presentment  be  made 
on  a  party  in  person,  and  no  objection  is  made  to  the  place 
where  such  presentment  was  made,  and  there  be  a  refusal 
to  pay,  it  will  be  deemed  a  sufficient  presentment.  ^* 

§79.  Presentment  at  Address  of  Bill. — ^Where  a  bill  is 
addressed  to  a  drawee  at  a  particular  place,  and  accepted 
generally  by  him,  such  address  indicates  where  it  is  to  be 
presented  for  payment.  A  presentment  for  payment  at  such 
place  is  sufficient  as  against  the  drawer  or  indorsers.  ^® 


CHAPTER  IX. 

DISCHARGE    AND    PAYMENT. 


180.  Payment  as  Dibcharge. 

81.  Appropriation  of  Payments. 

82.  Time  of  Payment. 

83.  Payment  to  Whom  Made. 

84.  Payment  by  Whom  Made. 

85.  Payment  for  Honor — Supra  Protest. 

86.  Right   to   Reissue    Paid   Paper. 

87.  Payment  by  mistake. 

88.  Discharge  Other  Than  by  Payment. 

89.  Discharge  of  Indorsers. 

90.  Payment  by  Check. 


§80.    Payment  as  Discharge. — ^A  negotiable  instrument 

*  Pearson  v.  Bank  of  Metropolis,  26  "West  v.  Brown,  6  Ohio  St.,  542. 

U.  S.,  89.  »» Parker  v.  Kellogg,  158  Mass.,  112. 

^  Miltenberger  v.  Spaulding,  33  Mo.,  ""  Farnsworth  v.   Mullen,    164   Mass., 

421;  and  see  Ante  §.  112. 


DEPARTMENT  OF  LAW  75 

is  discharged  when  the  right  of  action  thereon  is  extin- 
guished; that  is  to  say  when  the  instrument  is  paid  or  all 
legal  liability  thereon  is  otherwise  released  or  discharged. 
One  of  several  parties  to  an  instrument  may  be  discharged 
and  the  others  still  be  liable. 

Payment  is  the  performance  of  the  contract  with  the 
intention  of  extinguishing  the  liability  of  the  party  paying, 
or  of  the  one  for  whom  the  payment  is  made.  Payment  al- 
ways extinguishes  the  liability  of  the  party  paying,  but 
whether  it  has  a  similar  effect  as  to  the  contract  itself,  de- 
pends upon  whether  such  pajnment  fulfills  all  the  obligations 
of  the  contract.  If  it  does,  the  contract  is  extinguished; 
otherwise  if  it  does  not. 

§81.  Appropriation  of  Payments. — Where  one  is  in- 
debted to  another  on  two  or  more  instruments  or  accounts, 
and  payment  is  made  in  an  amount  insufficient  to  satisfy  all 
of  them,  and  the  payment  is  voluntary  and  not  under  stress 
of  legal  process,  the  debtor  has  the  right  to  appropriate  the 
money  paid  to  whatever  account  he  pleases.  He  may  do  this 
even  though  it  be  to  the  prejudice  of  a  party  who  is  security 
for  one  of  the  unpaid  debts.  As  between  a  debtor  and 
a  creditor,  the  debtor  has  the  right  to  say  to  what  debts  of 
his,  payments  shall  be  credited,  up  to  the  time  suit  is 
brought  on  an  instrument.  As  to  third  parties,  such  as  in- 
dorsers,  siu'eties  and  the  like,  such  appropriation  must  be 
made  by  him  within  a  reasonable  time.  ^  If  a  debtor  makes 
no  appropriation  of  his  payments  the  creditor  may  apply 
same  as  he  pleases  to  the  various  accounts  held  by  him.  A 
creditor  however  cannot  apply  a  payment  to  a  debt  not  yet 
due,  if  he  holds  an  obligation  of  the  debtor  already  due.  In 
order  to  make  an  appropriation  of  payments  it  is  not  neces- 
sary for  the  debtor  to  make  an  express  declaration  thereof 
to  the  creditor;  but  any  facts  or  circumstances  showing  an 
intention  to  make  an  appropriation  to  cover  certain  indebt- 
edness, will  be  binding  on  the  creditor.  ^ 

§82.  Time  of  Payment. — To  operate  as  a  discharge  of 
commercial  paper  a  payment  must  be  made  in  due  course, 
and  it  must  be  made  in  good  faith  and  without  notice  that 
the  title  of  the  holder  to  the  paper  is  defective.  Payment 
made  before  maturity  and  without  a  surrender  of  the  in- 

*  Green  v.  Ford,  79  Ga.,  130.  *  Taylor  v.  Sandiford,  20  U.  S.,  13. 


76         AMERICAN  EXTENSION  UNIVERSITY 

strument,  will  be  valid  between  the  original  parties  to  the 
paper  but  will  be  no  defense  to  the  payer  as  against  a  bona 
fide  holder  who  took  the  instrument  for  value  before 
maturity. ' 

When  payment  is  made  the  instrument  should  be  taken 
up  by  the  payor.  If  a  receipt  merely  for  the  money,  or  other 
evidence  of  payment,  is  taken  instead  of  the  paper  itself, 
and  the  latter  should  later  turn  up  in  the  hands  of  a  bona 
fide  holder  before  matiu*ity,  the  debtor  would  not  be  pro- 
tected by  the  possession  of  the  receipt. 

§83.  Payment  to  Whom  Made. — In  order  to  discharge 
a  debt  the  payment  must  be  made  to  the  holder  of  the  in- 
strument or  to  some  person  authorized  by  him  to  receive  it. 

Where  an  instrument  is  payable  to  order,  or  is  indorsed 
in  full — that  is  to  a  named  indorsee — payment  to  the  payee 
or  indorsee  in  possession  of  the  paper  is  valid.  But  posses- 
sion of  the  instrument  in  such  a  case  by  one  other  than  the 
named  indorsee  is  no  evidence  of  his  authority  to  receive 
payment,  and  if  such  person  is  not  in  fact  authorized  to  re- 
ceive payment,  the  payor  will  not  be  discharged.  *  Where 
however  an  instrument  is  indorsed  in  blank  or  is  payable  to 
bearer,  the  person  in  possession  of  the  instrument  will  be 
entitled  to  receive  payment  thereof.  Accordingly  if  pay- 
ment is  made  to  such  holder  in  good  faith  it  will  be  valid, 
although  it  subsequently  appear  that  he  had  no  right  to  the 
instrument  or  to  receive  the  money  due  thereon.  ^ 

The  taking  up  of  a  note  by  an  indorser  in  the  hands 
of  a  bona  fide  holder  for  value  before  maturity  makes  him 
legally  a  purchaser  from  such  holder  and  he  succeeds  to  his 
legal  rights  on  the  paper.  When  paid  by  an  indorser  after 
maturity,  such  payment  does  not  extinguish  the  debt,  but 
the  indorser  has  the  right  of  recovery  thereon  against  the 
maker,  or  the  prior  indorsers,  and  is  entitled  to  be  subro- 
gated to  any  collateral  security  held  by  them  for  the  pay- 
ment of  the  instrument.  ® 

Payment  to  a  payee  should  only  be  made  before  indorse- 
ment and  transfer  of  the  paper  by  him.  If  the  maker  of  a 
note  pays  it  to  the  payee  after  his  indorsement  and  transfer 

"Gosling  V.  Griffin,  85  Tenn.,  737.  "Stoddard  v.  Burton,  41  Iowa,  582. 

*Doubleday  v.  Kress,  50  N.  Y.,  410.        •  Tilford  v.  Garrells,  132  Ul.,  557. 


DEPARTMENT  OF  LAW  77 

thereof,  or  after  notice  of  such  an  assignment  or  transfer, 
either  before  or  after  maturity,  and  does  it  without  obtain- 
ing the  note,  it  will  not  avail  him  as  against  the  transferee 
and  holder  of  the  note.  "^ 

§84.  Payment  by  Whom  Made. — Any  one  liable  on  an 
instrument  may  discharge  his  liability  to  the  holder  by 
paying  it;  and  payment  at  its  maturity  by  the  party  ulti- 
mately liable  thereon,  i.  e.,  the  maker — or  in  case  of  an  ac- 
cepted bill  of  exchange,  the  acceptor — discharges  the  instru- 
ment. So,  too,  would  payment  by  one  of  several  joint  mak- 
ers or  acceptors. 

Except  in  the  case  of  accommodation  paper  payment  by 
the  drawer  of  a  bill  or  by  an  indorser  does  not  discharge  the 
instrument.  In  such  excepted  cases  the  one  who  so  pays  is 
remitted  to  his  former  rights  against  the  antecedent  parties 
on  the  paper,  and  is  subrogated  to  the  benefit  of  any  seciu*- 
ities  to  which  the  holder  who  has  so  been  paid  is  entitled 
against  such  antecedent  parties.  Even  should  an  endorser 
make  a  payment  it  would  not  affect  the  maker's  liability  on 
the  instrument,  and  notwithstanding  such  payment  the 
holder  may  still  recover  the  whole  amount  of  the  instrument 
from  the  maker,  being  then  accountable  for  its  amount  to  the 
one  making  such  partial  payment.  ^ 

§85.  Payment  for  Honor — Supra  Protest. — Any  per- 
son may  intervene  and  pay  a  bill  of  exchange  for  the  honor 
of  a  party  liable  thereon,  where  it  has  been  protested  for 
non-pajntnent ;  and  this  he  may  do  without  any  request  from 
the  one  from  whom  he  pays.  ^  As  was  stated  in  a  previous 
lesson,^"  such  payment  should  be  certified  before  a  notary 
public,  and  a  declaration  for  whom  the  payment  is  made 
should  be  recorded  by  the  notary  either  in  the  protest  of 
the  paper  or  on  a  separate  instrument,  and  the  parties  con- 
cerned should  be  duly  notified.  Such  payment  is  usually 
termed  an  act  of  honor  of  the  paper,  and  the  person  so  hon- 
oring it  succeeds  to  the  title  and  rights  thereon  of  the  person 
for  whom  he  so  pays  and  from  whom  he  thus  receives  it. 
Such  payment  of  an  instrument  discharges  all  parties 
thereto,  subsequent  to  the  one  for  whose  honor  it  has  been 

'Cox  V.  Cayan,  117  Mich.,  599.  « Wood  v.  Pugh,  7  Ohio,  164. 

"Madison    Square    Bank    v.     Pierce,      "See  §21  Ante. 
137    N   .Y.,    444. 


78         AMERICAN  EXTENSION  UNIVERSITY 

taken  up.  ^^  The  doctrine  of  supra  protest,  or  that  allowing 
payment  for  honor  —  has  no  applicability  to  promissory 
notes.  Hence  the  payment  of  a  note  by  one  not  a  party 
thereto,  without  the  request  so  to  do  by  one  who  is  a  party 
thereto,  gives  that  person  so  paying  no  legal  right  because 
of  such  payment  to  force  payment  from  any  of  the  prior 
parties.  ^^ 

§86.  Right  to  Reissue  Paid  Paper. — Payment  of  paper 
at  maturity  by  the  maker  or  acceptor  discharges  the  instru- 
ment and  it  cannot  thereafter  be  reissued.  But  where  a  bill 
is  paid  at  maturity  by  the  drawer  thereof,  if  it  was  payable 
to  his  own  order  and  he  is  accordingly  the  payee  as  well  as 
the  drawee,  it  may  be  reissued  by  him.  If  a  bill  is  payable 
to  the  order  of  a  third  person  it  cannot  be  reissued.  An 
indorser  however  who  pays  a  bill  or  note  at  or  after  maturity 
may  reissue  it  and  give  his  indorsee  a  right  of  action  thereon 
against  the  prior  parties.  If  an  instrument  is  paid  or  taken 
up  before  its  maturity  by  the  drawer  or  the  indorser,  the 
payor  may  reissue  and  further  negotiate  it.^^ 

§87.  Payment  under  Mistake. — Payment  made  under 
a  mistake  of  material  facts  may  be  recovered  back.  Hence 
money  paid  on  a  forged,  canceled  or  altered  instrument,  or 
paid  upon  an  instrument  by  mistake  to  one  who  has  no  right 
to  demand  it,  may  be  recovered  back.  ^^  If  however  after 
discovering  the  mistake,  the  payor  be  guilty  of  laches — ^i.  e., 
of  negligence  in  taking  advantage  of  his  rights — so  that  the 
position  of  the  other  party  is  changed  to  his  damage,  he  loses 
his  rights  to  recover.  Negligence  of  itself  will  not  defeat 
recovery;  but  where  negligence  exists,  and  if  a  recovery 
were  permitted  loss  would  be  thrown  upon  an  innocent 
party,  the  negligence  will  be  a  bar  to  such  recovery  by  the 
one  guilty  of  such  negligence. 

§88.  Discharge  Other  than  by  Payment. — There  may 
be  a  discharge  of  commercial  instruments  by  the  same 
means,  other  than  by  fulfillment  thereof,  as  will  discharge 
any  other  form  of  contract.  Novation,  accord  and  satisfac- 
tion, release  of  an  obligor,  such  as  an  acceptor  or  maker,  by 

"McDowell   V.    Cook,    45    Am.    Dec,  Thompson,  124  Mass.,  514. 

289.  "Talbot     v.     National     Bank,     129 
"Smith  V.  Sawyer,  55  Me.,  139.  Mass.,  67. 

^  West     Boston     Savingls     Bank     r 


DEPARTMENT  OF  LAW  79 

the  holder  and  the  like.  No  agreement  of  any  character 
between  the  parties  can  attach  to  an  instrument  however 
so  as  to  affect  the  rights  of  a  bona  fide  holder  without  notice, 
who  takes  it  before  maturity.  So  also  the  cancellation  of  an 
instrument  by  the  holder  or  with  his  consent,  whether  by  its 
destruction  or  by  writing  or  stamping  words  of  cancellation 
across  its  face  showing  intent  to  cancel,  is  a  discharge.  Like- 
wise a  material  alteration  of  the  terms  of  an  instrument 
without  the  consent  of  all  parties  liable  thereon,  will  have 
like  effect. 

Judgment  recovered  on  a  bill  or  note  extinguishes  the 
instrument  and  discharges  the  debt  thereby  witnessed  be- 
tween the  parties  to  the  action,  making  the  obligation  there- 
after to  rest  upon  the  judgment  and  not  upon  the  original 
indebtedness.  But  unless  the  judgment  is  satisfied  and  paid 
the  obligation  is  not  extinguished  between  the  plaintiff  and 
the  parties  to  the  instrument,  prior  and  subsequent  to  the 
defendant,  or  between  the  defendant  and  a  party  on  the 
paper  prior  to  the  plaintiff. 

Discharge  in  bankruptcy  or  insolvency  discharges  the 
liability  of  the  bankrupt  or  insolvent  but  does  not  affect  the 
liability  of  other  parties  to  an  instrument. 

§89.  Discharge  of  Indorsers. — Unless  the  actual  rela- 
tion of  an  indorser  on  an  instrument  is  proved  to  be  different 
from  that  which  it  appears  on  the  face  of  the  instrument  to 
be,  as  in  the  case  of  accommodation  indorsers,  each  indorser 
is  presumed  and  held  bound  to  indemnify  each  subsequent 
party  to  the  instrument,  and  has  himself  the  right  to  be 
indemnified  by  each  prior  party  thereto.  ^^  To  this  extent 
there  is  the  relation  of  suretyship  between  the  parties;  the 
maker  or  acceptor  being  the  principal  debtor,  and  the 
drawer  and  indorsers,  in  the  order  in  which  their  names 
appear,  being  sureties  or  guarantors.  The  same  causes 
that  will  discharge  a  surety  or  a  guarantor  will  therefor  dis- 
charge an  indorser.  ^^  So  that  if  the  holder  of  an  instrument 
enter  into  a  binding  agreement  to  give  time  to  the  acceptor 
or  maker  or  to  a  prior  indorser,  without  the  consent  of  the 
subsequent  indorsers,  he  discharges  the  subsequent  indors- 
ers from  liability.   It  is  said  however  that  where  in  granting 

"McDonald  v.    Magruder,    28    U.    S.,      "Smith  v.  Rice,  27  Mo.,  505. 
470. 


80         AMERICAN  EXTENSION  UNIVERSITY 

such  right  the  holder  expressly  reserves  his  rights  against 
subsequent  parties  they  are  not  so  discharged.  ^^ 

Giving  time  of  payment  to  an  indorser  however  would 
not  discharge  prior  parties.  Such  an  agreement  must  be 
fixed  and  definite  in  extent  and  founded  on  a  legal  consider- 
ation. ^^  But  a  release  of,  or  a  composition  with,  the  ac- 
ceptor or  the  prior  indorsers,  without  the  consent  of  subse- 
quent indorsers,  releases  the  latter  from  liability.  The  sur- 
render by  a  holder  of  any  security  he  may  have  received 
from  the  maker  or  acceptor,  discharges  the  indorsers  to  the 
amount  of  the  security  so  surrendered.  And  the  release  of 
one  joint  party  to  an  instrument,  discharges  all  the  joint 
parties.  So  also  where  one  of  several  joint  parties  is,  as  to 
the  others,  a  surety,  a  release  or  extension  of  time  granted 
to  the  principal  with  knowledge  of  the  relation  of  the  par- 
ties, discharges  the  surety.  ^^ 

§90.  Payment  by  Check.  —  If  a  person  receiving  a 
check  presents  it  with  due  diligence  at  the  bank  on  which 
it  is  drawn,  and  it  be  dishonored,  it  will  not  be  considered 
as  payment  of  the  debt  for  which  it  was  given.  But  laches 
on  the  part  of  the  holder  of  such  check,  such  as  a  delay  for 
several  days  in  presenting  it  for  payment,  will  discharge 
the  debt  if  any  damage  result  to  the  drawer  of  the  check 
from  the  failure  of  the  holder  to  promptly  present  same.  ^® 
It  is  not  required  that  a  check  be  presented  on  the  day  it  is 
drawn  or  is  received  by  the  payee,  but  it  should  be  presented 
or  put  in  course  of  collection  not  later  than  the  day  after  it 
is  received. 

"Hagey  V.  Hill,  75  Pa.  St.,  108.  "Hamilton   v.   Winona  Lumber   Co., 

"Brooks  V.  Allen,  62  Ind.,  403.  95  Mich.,  436. 

"Irvine  v.  Adams,  48  Wis.,  468. 


QUIZZER. 

MATURITY. 

l-§62.    In  what  instances  does  the  question  of  the  time  of 
the  maturity  of  commercial  paper  usually  arise  ? 

2-  The  law  of  what  place  governs  the  question  of 

maturity? 

3-  When  does  an  instrument  payable  on  a  fixed  day, 

or  at  a  stated  time  after  a  fixed  date,  mature  *? 


DEPARTMENT  OF  LAW  81 

4-§63.    What  option — and  in  whose   behalf — applies  to 
paper  payable  ''on  or  before"  a  fixed  date? 

5-  Of  what  practical  service  is  such  an  option? 

6-  When  does  paper  so  drawn  mature  ? 

7-  Give  illustrations  of  other  forms  of  maturity  hav- 

ing the  same  effect. 

8-  When  is  paper  payable  "  on  or  after ' '  a  stated  date, 

due? 

9-  Name  several  forms,  the  use  of  which  make  paper 

due  on  demand. 

10-  Does  a  provision  in  an  instrument  for  the  payment 

of  interest  affect  its  maturity? 

11-  When  is  paper  payable  on  demand  "overdue"  so 

as  to  affect  its  transfer? 

12-  What    determines    the    question  of  "reasonable 

time"  in  fixing  the  maturity  of  demand  paper? 
13-§64.    When  does  a  check  mature? 

14-  When  is  a  check  "overdue"  so  as  to  affect  its 

transfer? 

15-  What  are  "overdue"  checks  called? 

16-  By  what  rule  is  the  question  of  reasonable  time  in 

the  presentment  of  checks  determined? 

17-  When  do  certificates  of  deposit  mature — and  what 

rules  govern  that  matter? 

18-  What  can  you  say  as  to  the  question  of  maturity 

of  installment  notes? 

19-  When  will  instruments  payable  upon  the  happen- 

ing of  a  stated  contingency  mature  ? 

20-  State  fully  the  rule  governing  the  maturity  of  in- 

struments due  on  a  fixed  date  but  containing  pro- 
visions giving  the  holders  the  option  to  declare 
them  due  earlier  upon  certain  defaults  —  illus- 
trate. 

21-  '    Can  such  an  option  be  waived  or  lost — ^if  so,  in 

what  ways  ? 

22-  When  will  a  series  of  notes  due  at  different  dates, 

but  secured  by  a  mortgage  which  provides  that 
none  of  them  shall  be  payable  until  the  maturity 
of  the  last  one,  mature  ? 

23-  When  does  interest  on  an  interest-bearing  note 

become  due  ? 


82         AMERICAN  EXTENSION  UNIVERSITY 

24-  When  does  a  right  of  action  accrue  on  a  note  bear- 

ing interest  payable  annually,  with  option  to 
holder  to  make  it  a  part  of  the  principal  if  impaid 
when  due? 

25-  Is  this  changed  where  interest  is  due  at  stated 

periods  without  further  provision  affecting  it — 
if  so,  in  what  way? 


PRESENTMENT 


l-§65.     What  is  necessary  to  be  shown  in  order  to  fix  the 
liability  of  the  drawer  of  a  bill? 

2-  Does  this  apply  to  any  others — if  so,  to  whom? 

3-  What  does  "presentment"  in  the  legal  sense  in- 

clude? 
4-§66.    When  a  bill  is  presented  for  acceptance  and  ac- 
cepted, is  there  need  for  an^^  further  presentment 
at  maturity — if  so,  what? 

5-  Would  the  fact  that  the  bill  was  discharged  when 

presented  for  acceptance  alter  the  case — ^if  so, 
how? 

6-  Is  there  any  exception  to  this  rule — if  so,  what? 
7- §67.    Is  presentment  necessary  to  charge  a  maker  or 

acceptor? 
8-  When  is  the  beginning  of  a  suit  said  to  be  a  suffi- 

cient demand? 
9- §68.    What  do  you  understand  to  be  the  rule  as  to  guar- 
antors?   Answer  fully,  and  give  reasons. 

10-§69.  In  the  case  of  an  instrument  being  given  in  satis- 
faction of  a  debt,  what  is  the  duty  of  the  person 
receiving  it  and  what  would  be  the  result  of  his 
failure  to  act  ? 

11-  What  is  required  of  one  who  receives  an  instru- 

ment, the  proceeds  of  which  are  to  be  applied  on 
a  debt,  and  what  penalty  would  be  incurred  from 
his  failure  to  act? 

12-§70.    Who  may  present  a  note  or  inland  bill? 

13-  Is  a  power  of  attorney  necessary  for  this  purpose  ? 

14-  Where  a  party  holding  paper  be  deceased  when  it 

is  due,  who  may  present? 

15-  Who  may  present  when  the  party  be  insolvent  or 

bankrupt? 


DEPARTMENT  OF  LAW  83 

16-  Who  should  present  a  foreign  bill? 

17-  Would  presentnient  by  a  clerk  be  sufficient? 
18-§71.     To  whom  should  the  instrument  be  presented? 

19-  If  the  payor  be  deceased,  to  whom  must  present- 

ment be  made? 

20-  If  there  be  several  makers  not  partners,  to  whom 

should  presentment  be  made  ? 

21-  If  the  liability  be  joint  what  difference  would  this 

make  ? 

22-  If  they  were  partners  what  would  be  sufficient  pre- 

sentment ? 

23-  If  the  firm  had  in  the  meantime  been  dissolved, 

what  presentment  would  be  required  in  order  to 
be  sufficient? 

24-  If  a  partner  died  before  the  maturity  of  the  instru- 

ment, to  whom  should  it  be  presented? 
25-§72.     Is  possession  of  the  instrument  necessary  in  order 
to  make  a  valid  presentment?    Give  reason  for 
answer. 

26-  In  case  of  the  loss  or  destruction  of  the  instrument 

what  would  be  a  sufficient  presentment? 

27-  Is  payment  in  a  special  kind  of  currency  necessary 

— if  so,  when? 
28-§73.     What  is  the  rule  where  a  paper  is  made  payable 
in  a  city  without  designating  a  particular  place  ? 

29-  Is  there  any  difference  if  the  party  has  a  residence 

or  place  of  business  therein — if  so,  what? 

30-  Is  demand  for  paj^ment  at  the  place  named  essen- 

tial? 

31-  Who,  if  anyone,  is  affected? 

32-  Can  there  be  a  substitute  for  it,  or  will  previous 

notice  be  sufficient? 

33-  If  payable  at  a  particular  bank  is  formal  demand 

necessary? 

34-  What  will  be  deemed  a  sufficient  demand  in  such  a 

case? 

35-  If  the  instrument  is  in  the  bank  without  the  knowl- 

edge of  the  bank's  officers  will  that  be  deemed  a 
sufficient  presentment? 

36-  If  the  place  of  payment  be  designated  in  the  accep- 

tance where  should  the  bill  be  presented? 


84         AMERICAN  EXTENSION  UNIVERSITY 

37-  Would  this  control  if  the  bill  were  addressed  to  a 

different  place  1 

38-  Is  there  any  proviso  regarding  this,  oris  it  absolute 

— give  reason  for  answer? 
39- §74.    When  an  instrument  is  payable  on  a  fixed  day 
when  should  it  be  presented*? 

40-  Would  presentation  the  day  before,  or  after,  be 

sufficient  ? 

41-  What  is  the  rule  when  no  day  be  specified? 

42-  What  is  the  effect  of  indorsement  after  maturity? 

43-  When  should  presentment  be  made  in  such  a  case  ? 

44-  If  a  paper  be  transmitted  by  mail  and  delay  is 

caused  by  the  postal  authorities,   what   is   the 
effect? 

45-  What  is  the  rule  as  to  presentment  in  such  cases? 
46-§75.     How  is  time  reckoned  in  determining  the  maturity 

of  commercial  paper? 

47-  Do  we  figure  in  these  cases  by  lunar  or  calendar 

months  ? 

48-  What  determines  the  date  for  the  purpose  of  fixing 

maturity  when  an  instrument  is  undated? 

49-  When  will  paper  maturing  by  its  terms  on  Febru- 

ary 29th,  30th  or  31st  be  payable? 

50-§76.  At  what  hour  must  presentment  be  made  if  pay- 
able at  a  bank  ? 

51-  When,  if  payable  at  a  place  of  business,  and  when 

if  payable  at  a  residence  ? 

52-§77.  What,  as  regards  the  liability  of  the  maker,  is  the 
result  of  failing  to  make  presentment  ? 

53-  Would  the  fact  that  the  failure  to  present  resulted 

in  damage  to  him  affect  the  result? 

54-  Where  no  place  of  payment  is  mentioned  in  the 

paper  can  a  place  be  agreed  on? 

55-  How  would  such  an  agreement  affect  a  drawer  or 

indorser? 

56-  Where  no  place  of  payment  be  named  or  agreed  on 

where  should  presentment  be  made  ? 

57-  What  is  deemed  requisite  to  make  a  place  of  busi- 

ness such  as  to  make  a  presentment  thereat  suffi- 
cient? 
58-§78.    What  is  the  rule,  as  to  personal  presentment,  as  to 
the  place  of  making  it? 


DEPARTMENT  OF  LAW  85 

59- §79.  If  a  bill  be  addressed  at  a  particular  place  and  ac- 
cepted generally,  would  this  address  indicate 
anything  as  to  the  place  of  presentment  ? 


DISCHARGE   AND   PAYMENT. 

l-§80.    When  is  a  negotiable  instrument  discharged? 

2-  Does  the  discharge  of  one  party  thereto  discharge 

all  parties  ? 

3-  What  is  meant  by  payment  ? 

4-  What  is  the  effect  of  payment  on  the  liability  of 

the  party  making  it  ? 

5-  How  does  it  affect  the  contract  itself? 

6-§81.     When  has  a  debtor  the  right  to  make  an  appropria- 
tion of  his  payments  to  certain  of  his  indebted- 
ness*? 

7-  Can  he  make  an  appropriation  of  payment  in  favor 

of  one  debt,  and  in  prejudice  of  a  party  who  is 
security  on  another  debt*? 

8-  Until  when  has  a  debtor  the  right  to  make  such 

appropriation? 

9-  What  is  the  rule  as  to  third  parties  on  this  matter? 

10-  When  may  a  creditor  make  appropriation  of  pay- 

ments as  he  desires,  upon  several  debts  held  by 
him? 

11-  To  what  debts  must  the  creditor  give  preference? 

12-  How  may  appropriation  be  expressed  by  a  debtor? 
13-§82.     When  does  payment  operate  as  a  discharge? 

14-  What  is  the  effect  of  payment  of  an  instrument 

before  its  maturity? 

15-  What  should  be  done  with  an  instrument  on  pay- 

ment thereof  being  made  ? 

16-  Would  a  receipt  for  pajTnent  of  a  negotiable  in- 

strument protect  the  payor  as  evidence  of  pay- 
ment of  such  instrument  ? 
17-§83.     To  whom  shoiild  payment  be  made? 

18-  When  would  payment  to  a  payee  or  indorsee  in 

possession  of  paper  be  deemed  valid? 

19-  What  would  be  the  effect  of  payment  to  a  person 

in  possession  where  the  instrument  is  indorsed 
in  full,  or  is  payable  to  order? 


86         AMERICAN  EXTENSION  UNIVERSITY 

20-  Would  possession  be  sufficient  to  authorize  such 

payment  *? 

21-  In  what  case,  if  any,  would  payment  to  a  person 

in  possession  of  an  instrument  be  valid? 

22-  What  would  make  an  indorser  a  bona  fide  holder? 

23-  What  is  the  effect  of  payment  by  an  indorser  after 

maturity? 

24-  Does  it  extinguish  the  debt? 

25-  Has  an  indorser,  paying  an  instrument,  any  right 

to  the  collateral  security,  if  any,  held  by  the 
payee  ? 

26-  Wlien  only  should  payment  be  made  to  a  payee  ? 

27-  How  will  payment  of  an  instrument  affect  an  in- 

dorsee if  it  is  made  after  indorsement  or  transfer 
to  him,  and  without  surrender  of  the  paper? 
28-§84.     How  may  one  liable  on  an  instrument  obtain  his 
discharge  from  the  holder? 

29-  What  will  be  the  effect  of  payment  of  paper  at  its 

maturity  by  the  one  ultimately  liable  thereon? 

30-  What  will  be  the  effect  of  a  payment  by  one  of  sev- 

eral joint  makers  or  acceptors? 

31-  When  will  payment  by  a  drawer  or  indorser  dis- 

charge an  instrument? 

32-  What  is  the  general  rule  as  to  payment  by  a  drawer 

or  indorser? 

33-  Will  part  payment  by  an  indorser  affect  the  liabil- 

ity of  the  maker,  and  what  right  has  a  holder  in 
such  a  case  ? 

34-  In  such  a  case  for  what  would  the  maker  be  liable  ? 
35-§85.      To  what  rights  does  one  who  pays  for  honor  suc- 
ceed? 

36-  What  is  its  effect  on  parties  subsequent  to  the  one 

for  whose  honor  a  bill  is  paid? 

37-  What  application  has  the  doctrine  of  supra  protest 

to  promissory  notes  ? 

38-  What  rights,  if  any,  does  a  person  who  makes  such 

payment  acquire  in  the  case  of  a  note  ? 
39-§86.    Wliat  will  prevent  the  reissue  of  an  instrument? 

40-  When  may  it  be  reissued  by  the  drawer  even  if  paid 

at  maturity? 

41-  If  it  were  to  the  order  of  a  third  party  what  effect 

if  any,  would  it  have  ? 


DEPARTMENT  OF  LAW  87 

42-  Has  an  indorser  the  right  to  reissue  paid  paper  and 

if  so,  what  rights  does  such  reissue  confer? 

43-  What  effect  will  pajrment  before  maturity  have  on 

the  right  of  a  drawer  or   indorser   to   reissue 
paper? 
44-§87.    When  may  payment  made  under  a  mistake  be  re- 
covered? 

45-  What  effect  will  laches  in  seeking  such  recovery 

have,  if  any? 

46-  Will  negligence  defeat  such  recovery? 

47-  When  will  negligence  bar  a  recovery? 

48-§88.    What  methods  other  than  by  payment  are  there 
of  discharging  negotiable  paper? 

49-  Can  an  agreement  discharging  paper  attach  to  an 

instrument  so  as  to  affect  the  rights  of  a  bona 
fide  holder  without  notice,  before  maturity? 

50-  What  will  be  the  effect  of  cancellation  of  such 

paper? 

51-  What  will  be  the  effect  of  a  material  alteration  in 

such  paper? 

52-  What  is  the  effect  of  a  judgment  in  an  action  upon 

such  paper? 

53-  What  is  its  effect  on  other  parties,  not  parties  to 

the  action,  of  a  judgment  rendered  thereon? 

54-  What  will  be  the  effect  of  a  discharge  in  bank- 

ruptcy on  one 's  liability  on  such  paper  ? 

55-  What  will  have  a  similar  effect? 

56-§89.    What  relation  have  indorsers  to  one  another? 

57-  Is  this  likewise  true  of  accommodation  indorsers? 

58-  Is  there  any  relation  of  suretyship  in  the  engage- 

ment of  an  indorser — if  so,  what  is  it? 

59-  What  will  discharge  an  indorser? 

60-  Can  such  discharge  be  prevented — ^if  so,  how? 

61-  Will  the  extending  of  the  time  of  payment  to  an 

indorser  discharge  prior  parties  on  commercial 
paper? 

62-  When  will  a  release,  or  a  composition  with  an  ac- 

ceptor or  prior  endorsers,  release  subsequent  in- 
dorsers ? 

63-  What  will  be  the  effect  on  indorsers  of  the  surren- 

der of  security  given  the  payee  for  the  debt? 


88         AMERICAN  EXTENSION  UNIVERSITY 

64-  What  will  be  the  effect  on  indorsers  of  the  release 

of  a  joint  party? 

65-  Where  one  of  several  joint  parties  is,  as  to  the 

other,  a  surety,  what  effect  will  a  release  or  ex- 
tension of  time  to  the  principal  debtor,  with 
knowledge  of  the  relation,  have  as  to  him'? 
66-§90.     When  will  the  receipt  of  a  check  that  is  dishonored, 
not  be  considered  payment  1 

67-  What  will  discharge  the  debt,  even  if  the  check 

were  dishonored? 

68-  When  should  a  check  be  presented? 

69-  Is  presentment  on  the  day  it  is  made,  or  is  received 

by  the  payee,  necessarv — if  not,  what  will  suf- 
fice? 


DEPARTMENT  OF  LAW  89 

LESSON  14.— 

CHAPTER  X. 

PROTEST 

§91.   Definition. 

92.  Formalities. 

93.  When  and  by  Whom  Made. 

94.  Protest  Certificate  as  Evidence, 

95.  Protest  as  Notice  of  Dishonor. 

96.  Protest  Not  Evidence  of  Collateral  Facts. 

97.  Lofet  Certificate  of  Protest. 

98.  Notarial  Fees. 

§91.  Definition. — Protest  in  its  general  sense  refers 
to  and  includes  all  the  steps  legally  necessary  to  charge  an 
drawer  or  indorser  on  commercial  paper.  It  is  indispen- 
sable in  the  case  of  a  foreign  bill  of  exchange.  ^  The  pro- 
test may  be  either  for  non-acceptance  or  non-payment.  ,  It 
has  been  held  that  protest  is  unnecessary  in  the  case  of  in- 
land bills  of  exchange  and  promissory  notes.  ^  ; 

Protest  may  be  defined  as  a  solemn  declaration  in  writ- 
ing, in  due  form,  by  a  notary  public,  usually  under  his  notar- 
ial seal,  or  if  not  by  a  notary  by  some  responsible  unofficial 
person,  on  behalf  of  the  holder  of  a  bill  or  note,  protesting 
against  all  parties  for  any  loss  or  damages  by  the  non-accep- 
tance or  non-payment,  as  the  case  may  be,  of  the  bill  or  note. 

§92.  Formalities  .-/-The  formalities  of  protest  apply 
without  qualification,  aSid  a  strict  conformity  thereto  is 
necessary  to  a  valid  protest.)  The  certificate  of  protest 
should  identify  or  designate  the  instrument  to  which  it 
refers.  This  is  usually  done  by  affixing  the  instrument  pro- 
test or  writing  in  a  copy  of  it.  It  must  set  forth  the  fact 
of  the  presentation  of  the  paper  for  acceptance,  or  for  pay- 
ment. A  protest  setting  forth  a  demand  of  payment,  and 
saying  nothing  of  presentment  of  the  paper,  is  defective  on 
its  face.  V 

,  There  should  also  be  a  statement  as  to  the  party  to 

whom  it  was  presented,  and  the  one  to  whom  it  was  made.  ^ 

[The  time  and  place  of  presentment  must  also  be  stated 

together  with  a  statement  of  the  additional  fact  of  a  demand 

for  acceptance  or  for  payment.     The  fact  of  a  refusal  of 

*  Ticonic  Bank  v.  Stackpole,  41  Mo.,      ^  Green  v.  Louthain,  49  Ind.,  139. 
302.  'Musson  v.  Lake,  45  U.  S.,  262. 


90         AMERICAN  EXTENSION  UNIVERSITY 

acceptance  or  of  payment  must  also  be  set  forth;  and  the 
certificate  of  protest  should  be  signed  by  the  notary  making 
it.  (%Tiile  according  to  some  authorities  the  seal  of  the 
notary  is  not  requisite,  it  is  advisable  that  it  should  be 
affixed  to  the  certificate. 

§93.  When  and  By  Whom  Made. — A  protest  should  be 
made  on  the  day  of  the  presentment  or  demand,  and  should 
be  made  at  the  place  where  the  refusal  of  acceptance  or  of 
payment  takes  place.  It  should  be  made  by  a  notary  per- 
sonally. He  cannot  deputize  another  to  do  it.  Where 
however  no  notary  can  be  found,  protest  may  be  made  by 
any  respectable  or  substantial  citizen  of  the  place.  * 

§94.  Protest  Certificate  as  Evidence. — The  certificate 
of  protest  is  prima  facie  evidence  of  its  own  authority  and 
execution.  It  will  be  received  as  evidence  of  the  truth  'of 
the  facts  set  forth  therein  within  the  scope  of  the  official 
duty  of  the  notary,  ^  and  is  prima  facie  evidence  of  the 
dishonor  of  the  instrument  therein  described. 

In  most  states  notarial  protest  of  inland  bills  and  prom- 
issory notes  is  by  statute  also  made  prima  facie  evidence  of 
the  same  facts  as  in  the  case  of  foreign  bills. 

A  notary  upon  being  called  as  a  witness  may  use  the 
certificate  of  protest  to  refresh  his  memory,  and  the  protest 
itself  has  been  held  admissible  in  evidence  to  prove  the  facts 
set  forth  in  it.  ^ 

§95.  Protest  as  Notice  of  Dishonor. — The  usual  prac- 
tice is  to  embody  in  the  certificate  of  protest  a  statement  as 
to  notice  of  dishonor,  although  in  some  states  it  may  be  done 
by  a  separate  certificate.  The  certificate  being  evidence 
only  of  such  facts  as  may  be  stated  therein,  it  will  not  be 
notice  of  dishonor  unless  it  be  stated  therein  that  such 
notice  was  given.  ^  In  such  cases  it  should  also  contain  a 
statement  as  to  the  manner  of  giving  the  notice,  as  well  as 
the  time  and  place  when  such  notice  was  given.  It  is  not 
necessary  to  set  forth  the  contents  of  the  notice,  nor  by 
whom  the  notice  was  given — where  it  makes  the  positive 

*Todd  V.  Neal,  49  Ala.,  266.  'Martin  v.  Smtih^  66  N.  W.  Rep.,  61. 

•Pierce  v.  Idseth,  106  U.  S.,  546.  ^  Thorp  v.  Craig,  10  Iowa,  461. 


DEPARTMENT  OF  LAW  91 

statement  that  such  notice  was  given — the  presumption 
being  that  the  notary  made  the  service  of  notice.  ^ 

§96.  Protest  not  Evidence  of  Collateral  Facts. — The 
protest  will  not  be  received  as  evidence  of  facts  collateral 
to  and  independent  of  the  presentment,  refusal  and  notice 
Hence  a  statement  therein  that  demand  was  made  of  **one 
of  the  administrators,"  would  not  establish  the  fact  of  the 
death  of  the  acceptor  and  the  granting  of  letters  of  admini- 
stration to  the  party  to  whom  the  notice  was  given,  i'or 
the  same  reason  the  fact  of  diligent  search  and  inquiry  for 
the  indorser  of  a  note  for  the  purpose  of  giving  notice  of 
dishonor,  cannot  be  proved  by  a  statement  contained  in 
a  certificate  of  protest.  ^ 

§97.  Lost  Certificate  of  Protest. — If  a  certificate  of 
protest  be  destroyed  or  lost,  proof  of  the  facts  it  stated, 
must  be  made  in  the  usual  manner  for  proving  the  contents 
of  lost  instruments.  Independent  of  statutory  enactment 
prescribing  other  classes  of  evidence,  the  best  evidence 
which  the  nature  of  the  case  permits,  such  as  copies,  records 
or  memoranda,  and  the  like,  may  be  introduced  to  prove  the 
certificate.  ^^ 

§98.  Notarial  Fees. — In  all  cases  where  protest  is  re- 
quired the  notarial  fees  are  a  legal  charge  on  the  part  of  the 
holder,  and  may  be  added  to  the  instrument  and  charged 
against  the  party  protested.  Where  however  as  in  the  case 
of  an  inland  bill  or  promissory  note  not  requiring  protest, 
but  whose  protest  is  made  for  the  purpose  of  evidence  of 
dishonor  of  the  paper,  there  is  some  doubt  as  to  whether 
fees  therefor  can  be  recovered.  Where  there  is  no  indorser, 
and  hence  protest  would  be  absolutely  useless  from  a  legal 
standpoint,  no  protest  fees  are  chargeable  against  the  maker 
of  the  paper.  So,  too,  where  there  is  a  guarantor  of  a  note, 
protest  being  unnecessary  to  fix  his  liability,  protest  fees 
are  not  legally  recoverable.  ^^ 

•Slaughters    v.    Farland,     31     Gratt    "  McGarr  v.  Lloyd,  3  Pa.  St.,  474. 

(Va.),   134.  "Woolley  v.    Van    Valkenburgh,    16 

•Reier  v.  Strauss,  54  Md.,  278.  Kan.,  20. 


92         AMERICAN  EXTENSION  UNIVERSITY 

CHAPTER  XI. 

NOTICE  OF  DISHONOR 

§99.  Necessity  of  Notice — Definition. 

100.  To  Wliom  Must  Be  Given. 

101.  When  Must  Be  Given. 

102.  When    Negotiated    After    Dishonor. 

103.  When  Note  Payable  in  Installments. 

104.  Form  of  Notice.  ^ 

105.  Mode  of  Giving  Notice. 

106.  Misdirected  Notice. 

107.  What  Will  Excuse  Protest  and  Notice. 

108.  Waiver  of  Notice. 

109.  Proof  of  Notice. 

§99.  Necessity  of  Notice. — Notice  of  dishonor  is  re- 
quired to  be  given  to  all  indorsers  and  acceptors  liable  on  a 
dishonored  instrument,  and  the  failure  to  do  so  discharges 
the  liability  of  such  a  party  to  whom  no  notice  is  given. 
The  mere  fact  that  a  party  charged  on  commercial  paper 
has  knowledge  of  the  dishonor  of  paper  on  which  he  is 
liable,  is  not  sufficient.  He  must,  in  order  to  lay  the  legal 
foundation  for  holding  him  to  the  paper,  receive  notice -in 
due  form  and  manner  of  the  dishonor. 

Due  notice  is  not  notice — °r  knowledge  received  in  any 
sort  of  way — by  verbal  telling  from  an  outside  party,  by 
newspaper  items,  or  even  by  information  received  from 
the  maker  of  the  paper  itself  that  he  has  not  paid  it^it  is 
notice  of  the  fact  of  dishonor  given  by  the  protesting  oflicer, 
at  the  instigation  and  on  behalf  of  the  holder  of  the  paper, 
that  presentment  and  demand  thereof  was  duly  made,  pay- 
ment was  refused,  and  that  its  dishonor  is  protested  against 
him — said  part^y  so  notified — and  that  he  will  be  held  liable 
to  pay  said  paper.  ^  Accordingly  where  a  bill  of  exchange 
has  been  presented  lor  acceptance,  or  a  bill  or  note  has  been 
presented  for  payment,  and  been  refused,  such  notice  of 
dishonor  must  be  given  in  order  to  hold  the  drawer  or  indor- 
ser  thereon  liable.  ^  To  charge  an  indorser  alone  notice 
to  him  only  is  sufficient,  and  need  not  necessarily  be  given 
to  the  drawer. 

§100.  To  Whom  Must  be  Given. — In  the  case  of  suc- 
cessive indorsers  a  holder,  if  he  so  chooses,  may  give  them 
all  notice  so  as  to  fix  the  liability  of  all.  Such  notice  will 
inure  to  the  benefit  of  each  party  and  against  those  who 
stand  subsequent  to  him  on  the  paper.     A  holder  however 

*Long  V.  Stephenson,  72  N.  C.  569. 


DEPARTMENT  OF  LAW  93 

is  not  required  to  give  notice  to  all  indorsers  in  order  to 
fix  the  liability  of  any  particular  indorser  receiving  notice. 
He  is  required  to  notify  only  the  indorser  to  whom  he  looks 
for  payment,  although  in  practice  usually  all  parties  to  the 
instrument  are  duly  notified.  Therefore  the  holder's  im- 
mediate indorser,  if  he  receives  regular  notice,  will  not  be 
discharged  because  the  holder  did  not  give  notice  to  a 
previous  indorser.  ^ 

The  holder  of  paper  is  required  only  to  send  notice  to 
his  immediate  indorser  who  receiving  notice  should  prompt- 
ly transmit  it  to  his  immediate  indorser  and  so  on.  Each 
will  then  be  liable  to  his  immediate  indorser  or  to  the 
holder,  even  though  the  notice  did  not  reach  some  as  soon 
as  if  it  had  been  directly  sent  them  by  the  holder;  the 
holder  having  his  day  in  which  to  notify  his  indorser  and 
each  indorser  having  the  same  time  to  notify  his  predecessor 
and  so  on. 

If  then  an  indorser  receiving  notice,  wishes  to  have  a 
remedy  over  against  a  prior  indorser,  it  devolves  upon  him 
to  give  notice  to  such  prior  indorser,  irrespective  of  whether 
the  holder  has  done  so  or  not,  and  so  on  through  the  series 
of  indorsers  up  to  the  first.  ^ 

§101.  When  Must  be  Given. — Notice  of  dishonor  must 
be  put  in  transit  to  the  party  to  be  held  thereby,  *' within  a 
reasonable  time ' '  after  the  dishonor  and  protest  of  the  paper 
in  order  to  hold  such  party.  It  should  be  done  as  soon  after 
protest  as  is  possible  in  the  usual  and  due  course  of  business, 
and  in  any  event  not  later  than  the  day  following  protest — 
preferably  on  the  very  day  of  the  protest. 

Notice  if  given  prior  to  the  dishonor  of  paper  will  be 
void,  as  there  is  in  such  cases  no  default  at  the  time  the  no- 
tice would  thus  be  given;  *  and  notice  if  forwarded  by  mali 
should,  as  alreadj^  suggested,  be  posted  early  enough  to  be 
sent  by  mail  of  the  day  succeeding  the  dishonor.  ^  Sundays 
and  legal  holidays  are  excluded  in  computing  the  time  when 
notice  should  be  sent.  Notice  of  the  first  occurrence  of  dis- 
honor should  be  given,  the  one  presentment  and  demand, 

*Big  Sandy  Bank  v.  Chilton,   40  W.  265. 

Va.  491.  'King  v.  Crowell,  61  Me.  244. 

"Wood  V.   Callaghan,   61   Mich.   402;  'Smith  v.  Poillon,  87  N.  Y.  590. 

Butler  V.  Duval,  4  Yerg.    (Tenn.) 


94         AMERICAN  EXTENSION  UNIVERSITY 

followed  by  dishonor  of  paper,  laying  the  legal  foundation — 
upon  due  notice  being  given — to  hold  indorsers. 

Paper  once  dishonored  need  not  be  presented 
again  in  the  hope  that  it  will  be  paid  and  it 
should  not  be  so  re-presented,  if  one  wishes  to  surely 
hold  indorsers.  Failure  to  protest  and  to  give  due 
notice  on  the  first  dishonor  may  be  deemed  a  waiver  of  the 
right  to  call  upon  indorsers.  To  charge  the  indorser  of  a 
note  payable  on  demand  he  must  be  given  notice  of  nonpay- 
ment on  the  first  demand;  and  notice  of  nonpayment,  on  a 
second  demand,  even  though  it  be  received  by  the  indorser 
as  soon  as  would  a  notice  had  it  been  sent  after  the  first 
demand,  will  be  insufficient.  Nor  is  it  sufficient  to  hold 
indorsers,  to  prove  that  notice  of  dishonor  for  nonpayment 
of  a  draft  was  sent  where  there  had  been  previous  dishonor 
of  the  paper  by  its  non  acceptance  and  no  protest  and  notice 
was  thereafter  sent.  This  is  so  even  in  the  case  of  bills 
which  need  not  have  been  presented  for  acceptance,  if 'as 
matter  of  fact  they  were  so  presented,  and  their  acceptance 
was  refused.  * 

Where  the  holder  of  a  bill  tenders  it  to  the  drawee  for 
acceptance  before  it  is  due,  and  acceptance  is  refused,  but 
the  holder  keeps  it  until  it  is  due  and  then  presents  it  for 
payment  which  is  also  refused,  and  then  returns  to  the 
second  indorser,  and  he  not  knowing  of  the  laches  of  the 
holder  in  not  protesting  the  paper  for  non-acceptance  takes 
it  up,  it  has  been  held  that  his  ignorance  of  the  laches  of  the 
former  holder  of  the  bill  when  paid,  would  not  entitle  him  to 
recover  against  the  first  indorser  who  sets  up  that  laches  as 
a  defense.  "^  Such  a  payment  however  having  been  made 
under  a  mistake  of  fact  may  be  recovered  from  the  party  to 
whom  it  was  made.  ^ 

§102.  When  Negotiated  After  Dishonor. — The  indor- 
ser before  maturity  of  a  bill  or  note  which  has  been  dishon- 
ored, and  whose  liability  has  been  fixed  by  due  notice,  is  not 
entitled  upon  further  negotiation  of  the  instrument,  to 
additional  notice  at  the  hands  of  such  subsequent  holder.  * 
And  if  an  indorser  originally  charged  with  notice  pays  the 

•  United    States    v.    Barker,    2    4Fed.      *  Talbot   v.   Nat'l   Bank   of   Common- 

Cas.  1004.  wealth,  129  Mass.  67. 

»Bartlett  v.  Benson,  2  M.  &  W.  737.      'St.  ohn  v.  Roberts,  31  N.  Y.  441. 


DEPARTMENT  OF  LAW  95 

note  or  bill  and  receives  it  back,  and  puts  it  in  circulation  a 
second  time  without  erasing  his  endorsement,  he  will  be 
liable  to  a  subsequent  indorsee  without  further  notice  of 
dishonor,  he  being  estopped  from  denying  such  liability. 

§103.  When  Note  Payable  In  Installments. — ^Notice 
of  dishonor  being  required  in  the  case  of  all  bills  and  notes, 
at  once  upon  their  being  dishonored,  in  order  to  charge 
indorsers  in  the  case  of  a  note  payable  in  installments,  notice 
should  be  given  of  the  non-payment  of  each  unpaid  install- 
ment. The  omission  to  give  notice  of  the  non-payment  of 
an  installment  will  not  however  affect  the  liability  of  an 
indorser  of  the  note  for  the  non-payment  of  an  install- 
ment of  which  he  had  been  duly  notified.  ^" 

§104.  Form  of  Notice. — The  notice  of  dishonor  is  not 
required  to  be  in  any  prescribed  language.  Nor  must  it 
necessarily  be  in  writing.  Verbal  notice  will  be  sufficient 
if  it  covers  all  the  essentials  of  due  notice.  When  given  in 
writing  it  should  be  dated  so  as  to  aid  in  the  identification  of 
the  paper.  If  the  name  of  the  person  sought  to  be  held  is 
omitted,  or  is  inaccurately  stated,  it  will  render  the  notice 
invalid  as  to  him.  So  also  the  omission  of  the  place  of  ad- 
dress of  such  party,  or  an  inaccurate  statement  thereof, 
although  if  the  notice  be  in  fact  received,  the  incompleteness 
or  inaccuracy  of  address  will  be  immaterial. 

Sufficient  facts  must  appear  in  the  notice  to  constitute 
it  a  notice  of  dishonor — those  facts  essential  to  due  notice 
as  previously  given  ^^ — and  the  contents  of  a  written  notice 
may  be  proved  without  the  production  of  the  notice  itself. 
'^Che  notice  should  so  designate  or  distinguish  the  paper  pro- 
tested as  to  leave  no  reasonable  doubt  in  the  mind  of  the 
party  notified  as  to  which  paper  is  intended;  but  immaterial 
omissions  or  misdescriptions  will  not  vitiate  a  notice.  ^^ 
The  notice  should  be  signed  by  the  notary  or  other  party 
protesting  the  paper,  or  at  least  accurately  indicate  the 
person  from  whom  it  proceeds. 

§105.  Mode  of  Giving  Notice. — Notice  of  dishonor  may 
be  sent  by  mail  though  it  has  been  held  that  when  the 

"Fitchburg   Ins.    Co.    v.    Davis,    121 

Mass.  121.  "Townsend  v..  Heer  Dry  Goodls  Co. 

"See,  Ante,  §99.  85  Mo.  508. 


96         AMERICAN  EXTENSION  UNIVERSITY 

parties  reside  in  the  same  immediate  neighborhood,  and  are 
accustomed  to  receive  mail  at  the  same  post  office,  such 
notice  should  be  served  personally,  or  left  at  the  residence 
or  place  of  business  of  the  person  to  be  charged.  ^^  It  has 
been  said  that  the  mail  service  is  to  be  resorted  to  only 
when  the  parties  live  in  different  towns  or  at  a  wide  distance 
apart  in  large  cities;  but  if  a  notice  so  deposited  be  in  fact 
received  in  due  time,  it  will  be  held  sufficient.  The  deposit 
of  a  notice  duly  addressed  and  with  sufficient  postage  there- 
on, in  a  street  letter  box  provided  by  the  post  office  depart- 
ment for  the  reception  of  letters,  or  the  delivery  of  such  a 
notice  so  prepared  to  an  official  letter  carrier,  will  be  deemed 
sufficient  irrespective  of  whether  it  was  ever  in  fact 
received.  ^^ 

§106.  Misdirected  Notice. — If  the  party  giving  notice 
be  ignorant  of  the  place  of  residence  or  business  of  the  party 
to  be  notified,  he  should  exercise  due  diligence  in  making 
inquiry  regarding  the  same.  This  inquiry  must  be  ordinary 
and  reasonable;  and  when  he  acts  in  good  faith  upon  the 
information  so  obtained  the  party  to  be  charged  will  be  held 
Liable  even  though  the  notice  may  have  been  sent  to  the 
wrong  place.  ^^  Where  however  after  such  diligent  inquiry 
no  place  of  business  or  place  of  residence  of  the  party  to  be 
charged  can  be  ascertained,  a  notice  addressed  to  him  and 
deposited  in  the  post  office  at  the  place  of  residence  of  the 
holder  of  the  paper  will  be  sufficient.  ^® 

§107.  What  Will  Excuse  Protest  and  Notice.— It  has 
been  held  that  where  the  drawer  of  a  bill  has  no  effects  in  the 
hands  of  the  drawee,  and  hence  no  financial  right  to  expect 
that  the  drawee  will  honor  such  draft,  yet  the  drawer  will 
not  be  discharged  for  want  of  presentment  of  the  paper  or 
notice  of  dishonor.  However,  a  drawer  is  entitled  to  the 
presentment  of  his  draft  and  notice  if  it  is  dishonored,  if, 
at  the  time  of  drawing,  he  had  reason  to  expect  his  bill 
would  be  honored,  based  upon  a  state  of  facts  connected 
with  the  transactions  as  they  then  existed  between  the 
drawee  and  himself,  even  if  he  had  no  actual  credits  with 

"•Forbes   v.    Omaha    Nat'l    Bank,    10      "  Garver  v.  Downie,  33  Cal.  176. 

Neb.  340.  "  Staylor  v.  Ball,  24  Md.  200. 

"Pearce  v.  Langfit,  101  Pa.  St.  511. 


DEPAETMENT  OF  LAW  97 

the  drawee.  ^'  If  an  instrument  be  void  an  indorser  thereof 
is  liable  without  proof  of  demand  and  notice. 

Where  a  drawer  or  indorser  receives  funds  from  the 
acceptor  or  maker,  for  the  special  purpose  of  paying  the 
bill  or  note,  or  agrees  to  pay  the  same  upon  having  security 
placed  in  his  hands,  he  cannot  insist  upon  demand  or  notice, 
he  having  no  remedy  over,  when  he  thus  assumes  primary 
liability.  But  where  such  primary  liability  is  not  assumed 
when  receiving  security,  such  party  is  still  entitled  to  de- 
mand and  notice.  ^^ 

When  the  drawer  and  drawee  of  the  paper  are  the  same 
person  no  notice  nor  presentment  is  necessary.  So,  too,  if  a 
bill  be  drawn  on  a  partnership  by  one  of  its  members;  or  by 
the  partnership  on  one  of  the  firm,  notice  is  unnecessary. 

If  the  maker  or  acceptor  abscond  subsequent  to  the 
making  of  a  note  or  the  accepting  of  a  bill,  and  before 
maturity  thereof  presentment  to  him  or  an  attempt  to  make 
such  presentment  is  unnecessary  as  it  would  be  unavailing. 
But  if  the  instrument  be  made  payable  at  some  specified 
place,  as  at  a  particular  bank,,  or  a  named  address,  it 
should  nevertheless  be  presented  at  that  place.  ^^ 

If  demand  at  the  place  of  payment  as  specified  in  the 
instrument  has  become  impossible  by  reason  of  the  fact  that 
the  place  has  ceased  to  exist,  such  presentment  is  unneces- 
sary. ^® 

§108.  Waiver  of  Notice. — The  right  of  a  di-awer  or 
indorser  to  require  presentment  protest  and  notice  may  be 
dispensed  with  by  his  waiver  of  same.  An  agreement  of 
waiver,  between  an  indorser  and  the  maker  of  paper  will 
inure  to  the  benefit  of  an  indorsee.  -^  Such  act  or  declara- 
tion must  be  the  act  of  the  person  entitled  to  take  advantage 
of  such  f  ormalit}^  Any  member  of  a  partnership  ma}-  make 
such  a  waiver  on  behalf  of  the  firm  without  special  author- 
ity if  the  paper  was  executed  in  the  course  of  the  partner- 
ship business;  and  it  may  be  so  made  even  after  the  disso- 
lution of  the  firm.  ^' 

"French  v.  Bank  of  Columbia,  8  U.  -"•  First  Nat.  Bank  v.  Wever,  15  S.  W. 

S.  153.  Rep.   41. 

"  Ray  V.  Smith,  84  U.  S.  411.  ="  Rogers  v.  Hackett,  21  N.  H.  100. 

"  Farwell    v.    St.    Paul    Fruit   Co.    45  "Darling  v.  March,  22  Me.  184. 

Minn.   499. 


98         AMERICAN  EXTENSION  UNIVERSITY 

If  a  waiver  be  contained  in  the  body  of  a  written  instru- 
ment it  binds  each  party  to  the  contract  who  sign  the  instru- 
ment. If  however  a  waiver  be  contained  in  an  indorsement, 
it  binds  only  the  person  making  it  and  does  not  affect  the 
other  indorsers. 

A  waiver  may  be  made  by  a  drawer  or  indorser  at  the 
time  of  the  execution  of  the  instrument,  or  of  the  indorse- 
ment, or  any  time  thereafter  before  maturity  of  the  in- 
strument. A  waiver  may  be  in  direct  and  positive  terms, 
by  implication,  or  by  an  understanding  between  the  parties 
of  such  a  character  as  to  be  clear  that  a  waiver  is  intended.  ^* 
Waiver  of  protest  is  equivalent  to  an  express  waiver  of  pre- 
sentment and  notice  as  well  as  of  protest.  ^^  Waiver  of 
notice  however  is  not  a  waiver  of  due  presentment  and 
demand.  ^^  Waiver  may  be  implied  from  the  act  or 
language  of  a  drawer  or  an  indorser  which  would  put  a 
reasonable  person  off  his  guard  or  would  induce  him  to 
forbear  making  presentment  or  notice.  ^® 

An  agreement  made  before  maturity  to  renew  an  instru- 
ment, or  to  extend  the  time  of  payment,  waives  the  neces- 
sity of  demand  and  notice ;  but  an  agreement  to  extend  the 
time  for  bringing  suit  thereon  is  not  such  waiver;  nor  is  the 
mere  request  for  a  forbearance. 

If  the  drawer  or  indorser  with  knowledge  of  the  neglect 
of  the  holder  to  use  due  diligence,  promises  to  pay,  or  assents 
to  the  continuance  of  his  liability  as  if  due  diligence  had 
been  exercised  he  thereby  waives  the  consequence  of  the 
laches  of  the  holder  and  stands  in  the  position  as  if  he  had 
been  properly  charged  by  presentment,  demand  and 
notice.  ^'^  If  however  he  be  ignorant  of  the  laches,  such 
promise  to  pay  will  not  be  binding. 

§109.  Proof  of  Notice. — The  party  bringing  an  action 
on  commercial  paper  that  has  been  protested,  must  allege 
and  prove  notice, — as  well  as  presentment,  demand,  and 
protest — or  show  sufficient  cause  for  failure  to  send  such 
notice.  He  may  show  the  receipt  of  such  notice  affirmative- 
ly or  by  admissions  of  the  defendant.     Or  it  may  be  shown 

"Johnson  Co.  Bank  v.  Lowe,  47  Mo.  ^  Sprague  v.  Fletcher,  8  Ore.  367. 

App.  154.  ^  Quaintance  v.   Goodrow,   16   Mont. 

•*  Lancaster   Bank   v.    Hartman,    110  376. 

Pa.  St.  196.  "Curtis  v.  Sprague,  51  Cal.  239. 


DEPARTMENT  OF  LAW  99 

that  all  the  necessary  steps  were  taken  as  provided  by  law; 
in  which  case  the  defendant  is  presumed  to  have  received 
the  notice.  It  will  be  sufficient  if  facts  are  proven  that 
raise  a  prima  facie  presumption  of  the  notice  having  been 
sent.  ^® 

*Saco  Nat'l  Bank  v.  Sanborn,  63  Me.  340, 


QUIZZEE. 

PROTEST 


1-§91.     To  what  does  protest  in  its  general  sense  refer? 

2-  When  is  it  indispensable,  and  for  what  purpose  is 

it  made?  /4  jr»^  ^  ^'"'^^  ^  W-  ^'^'^"-^  ^_j^  US. 

3-  On  what  paper  is  it  legally  unnecessary?  ^'5^^f<]gJ" 

4-  Define  protest. 

5-§92.  Is  strict  formality  required?    ^J^^ 

6-  What  should  the  certificate  contain — state  fuUv? 

7-§93.  When  should  the  protest  be  made?  ^  ^*  cLct^^^  r  ^-O-v ^^  - '- 

8-  Where  should  it  be  made?  (3A-  \aj^r*^  " 

9-  By  whom  should  it  be  made  ?     '^"^  ^"^^ 

10-  Need  it  be  made  by  any  law  officer — ^if  not  by  whom 

else  and  when  can  it  be  so  made?  ^'*  f^-^^^-<^'^Y 

ll-§94.     Of  what  is  the  certificate  of  protest  prima  facie  ^rr^' 
evidence?        '  "'  '         -    - :  -  /^^ o^  ^"^^^ 

12-  Is  the  protest  of  an  inland  bill  or  promissory  note 

of  any  value — if  so,  what?  ^^^^^^^Z^'^^^^Sl^  ^"*^^ 

13-  Can  it  be  used  to  refresh  the  notary's  memory?  *  "  ^^  , 
14^  Of  what  facts  is  it  evidence  ?  "  7  '-^  *' 
15-§95.    Is  the  certificate  of  protest  ever  evidence  of  notice   . 

of  dishonor — if  so,  when?  ^~.^J^v\  ^<.aJ^c^  p'hu\>^  '•^^-^ 
16-  What  must  it  then  contain — state  fully? 

17-§96.    How  far  is  the  certificate  evidence  of  collateral 

facts.   Give  illustration  of  collateral  facts  that 

such  certificate  will  not  prove. 
18-§97.    How  may  the  facts  be  proven  if  the  certificate  be 

lost  or  destroyed? 

19-§98.    When  are  protest  fees  a  legal  charge — and  against 
whom?  y.  :.^    ' 

20-  Are  they  a  charge  when  there  is  no  indorser — and 

why?  ->i^L6^. 


100       AMERICAN  EXTENSION  UNIVERSITY 

21-  Can  they  be  charged  against  a  guarantor — and 

NOTICE  OF  DISHONOR  .  .  ,^,J?vtr 

l-§99.     To  whom  must  notice  of  dishonor  be  given?  ^yi&p^ 

2-  What  is  the  effect  of   the   failure   to   give   such 

notice? 

3-  If  a  party  has  knowledge  of  the  dishonor  otherwise 

than  by  due  notice,  is  he  stiU  entitled  to  such 
notice '^  ..  a','' 

4-  Define  ' ' due  notice. '%  3  JL  y^^^tuU  ^  ^^W^M^^-f   6 1 

5-  If  a  bill  of  exchange  be  presented  for  acceptance 

and  refused  should  notice  be  given — and  why?  ^ 

6-  Is  it  necessary  to  give  notice  to  the  drawer  in  order 

to  hold  the  indorser? 
7-§100.  May  a  holder  notify  all  indorsers,  and  what  will  be 
the  effect  of  such  notice?  ' 

8-  Is  he  required  to  do  so — if  not  what  is  he  required ,  v,, 

to  do?  ^^  '^^\ 

9-  Will  a  holder's  immediate  indorser  be  discharged 

for  the  failure  to  notify  prior  indorsers?  "v^ 

10-  To  whom  only  is  a  holder  required  to  send  notice-r  !/; 

and  what  should  such  party  then  do?..         ^^r^ 

11-  What  is  required  of  an  indorser  who  receives  notice 

in  order  to  have  a  remedy  against  a  prior  in- 
dorser?    J-:  '.'r  •     ^,  ,/    . 
12-§101.  When  must  notice  of  dishonor  be  put  in  transit?  ^^ 

13-  Is  a  notice  given  prior  to  dishonor  good — and  why?  ^  ^ 

14-  Must  notice  be  given  of  the  first  dishonor  of  paper 

— and  why? 

15-  Should  paper  once  dishonored  be  again  presented 

for  payment?    ,  ^- 

16-  What  is  the  legal  danger  of  such  re-presentation? 

17-  Would  notice  of  the  dishonor  of  a  second  demand 

be  sufficient,  where  previous  demand  had  been 
refused — and  why? 

18-  Where  a  bill,  not  necessary  to  be  presented  for  ac- 

ceptance, was  so  presented  and  was  refused,  and 
then  was  presented  for  payment  and  a^ain  re- 
fused, of  which  last  refusal  alone  notice  was 
sent,  what  will  be  the  effect? 


DEPARTMENT  OF  LAW  101 

19-  What  will  be  the  position  of  a  second  indorser  who 

not  being  aware  of  the  facts  stated  in  the  last 
question,  takes  up  the  bill — state  fully? 

20- §102.  What  are  the  rights  of  an  indorser  before  maturity 
— where  a  bill  has  been  dishonored  and  notice 
given — upon  the  further  negotiation  of  the  in- 
strument ?   >■ 

21-  If  an  indorser  who  had  notice  takes  up  the  paper 

and  puts  it  into  circulation  a  second  time,  is  he 
entitled  to  notice  from  a  subsequent  indorsee — 
and  why?     ^^^: 

22-§103.  What  is  the  rule  as  to  notice  of  dishonor  where  a 

note  is  payable  in  installments'?  ^X-^  vv^l*>iit«^*^^ 

23-  What  will  be  the  effect  of  failure  to  give  notice  in 

the  case  of  one  particular  unpaid  installment? 

24-§104.  Is  any  particular  form  of  notice  required? 

25-  Must  notice  of  dishonor  be  in  writing? 

26-  When  in  writing  what  should  it  contain;  and  what 

will  be  considered  fatal  omissions? 

27-  What  proof,  if  any,  will  render  incompleteness  or 

inaccuracy  in  a  notice  immaterial? 

28-  Must  a  written  notice  be  produced  to  prove  its 

contents?  1x0 

29-  What  must  the  notice  contain,  and  what  omissions 

if  anv,  will  not  affect  it? 
30-§105.  When  parties  reside  in  the  same  immediate  neigh-  ^yu 
borhood  how  should  the  notice  be  given?  ' 

31-  When  may  mail  service  be  resorted  to  in  serving 

notice  ? 

32-  What  will  be  the  effect  of  depositing  a  notice  in  a 

street  letter  box  or  when  delivered  to  a  letter 
carrier?         \ 

33-  What  will  make  the  mode  of  service  immaterial? 
34-§106.  What  course,  as  to  giving  notice,  should  be  pursued 

when  one  is  ignorant  of  the  place  of  business  or 
residence  of  party  to  be  notified? 
35-  How  can  notice  then  be  sent?  '^^  ^k>-C«>U-v^  t^  O  . 

36-<^107.  Wliat  will  excuse  presentment,  protest  and  no- 
tice? 

37-  When  is  the  drawer  of  a  bill  legally  entitled  to 

have  it  presented,  and  so  to  get  notice  ? 


102       AMERICAN  EXTENSION  UNIVERSITY 

38-  What  wiU  be  the  effect  of  a  void  instrument  as  to 

the  necessity  for  presentment  and  notice*? 

39-  What  effect  will  the  fact  that  the  drawer  or  indor- 

ser  has  funds  in  his  hands  for  the  purpose  of 
paying  the  instrument  have? 

40-  How  would  this  apply  if  it  is  securities  that  are  so 

held? 

41-  Is  there  any  exception — if  so,  what? 

42-  What  effect  wiU  the  fact  that  the  same  person  is 

the  drawer  and  drawee  of  paper  have  as  to  right 
to  notice  ? 

43-  What,  if  the  bill  is  drawn  on  a  firm  by  one  of  its 

members? 

44-  How,  if  it  is  drawn  by  one  of  the  partner's,  on  his 

firm? 

45-  What  is  the  rule  as  to  necessity  of  notice  in  the 

case  of  an  absconding  debtor? 

46-  What  is  the  rule  as  to  presentment  when  the  place 

specified  in  the  bill  has  ceased  to  exist  ? 
47- §108.  Can  presentment,  notice  and  protest  be  waived? 

48-  Who  will  such  waiver  affect? 

49-  By  whom  can  such  waiver  be  made  ? 

50-  When  can  such  waiver  be  given  by  a  member  of  a 

firm — and  is  special   authority   to   waive   re- 
quired? 

51-  How  will  such  right  be  affected  by  the  dissolution 

of  the  firm? 

52-  What  will  be  the  effect  of  a  waiver  contained  in  the 

body  of  an  instrument"? 

53-  What  is  its  effect  if  it  be  in  the  indorsement  only? 

54-  When  may  a  waiver  be  made  ? 

55-  In  what  manner  must  a  waiver  be  made  ? 

56-  What  will  be  the  legal  effect  of  a  waiver  of  protest 

only? 

57-  Will  waiver  of  notice  have  the  same  effect — if  not 

what  is  its  effect? 

58-  Can  waiver  be  implied  by  act  or  language — if  so, 

what  must  be  its  nature  ? 

59-  What  will  be  the  effect,  on  the  question  of  waiver, 

of  an   agreement   made   before   maturity   of 
paper — ^to  renew  it? 


DEPARTMENT  OF  LAW  103 

60-  Will  an  agreementextending  the  time  of  bringing 

suit  on  paper  have  a  similar  effect? 

61-  How  will  it  be  affected  by  a  request  for  a  forbear- 

ance? 

62-  What  will  be  the  effect  of  a  promise  to  pay,  after 

neglect  to  conform  to  the  formalities,  where  the 
party  knew  of  such  neglect  ? 

63-  If  there  is  no  such  knowledge  will  it  alter  the  situ- 

ation— if  so,  how? 
64- §109.  On  whom  is  the  burden  of  showing  that  everything 
necessary  to  hold  indorsers  has  been  complied 
with? 

65-  Howmay  it  beshown? 

66-  What  is  the  presumption  after  such  proof  is  made  ? 
67-  To  what  extent  must  such  proof  go? 


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104       AMERICAN  EXTENSION  UNIVERSITY 

LESSON  15.— 

CHAPTER  Xn. 

ACTIONS    AND   DEFENCES. 

§110.  In  General. 

111.  Joint   Parties. 

112.  Divisibility   of   Cause  of  Action. 

113.  Instruments  to  Bearer  or  With  Blank  Indorsement. 

114.  Instruments   Specially   Indorsed. 

115.  What  Constitutes  Right  to  Sue. 

116.  Who  may  be  Sued. 

117.  When  Right  of  Action  Accrues. 

118.  When  Right  of  Action  Expires. 

119.  Revival  of  Right  of  Action. 

120.  Several  Actions  on  One  Instrument. 

121.  Action     Against  Indorser     and  Surety. 

122.  Joint  and  Several  Liability. 
423.  Actions  on  Collateral   Securities. 

124.  Action   on   Lost   Paper. 

125.  Allowance  of  Interest. 

126.  Defenses  to  Commercial  Paper. 

(a)  In  General. 

(b)  Repudiation    of    Instrument. 

(c)  Illegality    of    Instrument. 

(d)  Discharge  and  Payment. 

§110.  In  General. — The  holder  of  a  negotiable  instru- 
ment having  a  legal  title  thereto,  may  sue  thereon  in  his  own 
name  whether  he  possesses  a  beneficial  interest  in  its  con- 
tents or  not.  If  there  be  a  special  indorsement  thereof  to 
a  particular  person,  such  holder  may  still  sue  in  his  own 
name  although  his  name  be  indorsed  on  the  paper  after 
such  special  indorsement. 

Agents,  receivers,  trustees,  or  personal  representatives 
of  deceased  persons,  may  sue  in  their  own  names  on  instru- 
ments belonging  to  their  principals  payable  to  bearer,  or 
indorsed  in  blank.  If  however  they  be  indorsed  specially 
to  a  particular  person,  no  one  but  such  person,  or  his  legal 
representative  can  maintain  suit  thereon.  ^  A  party  for  ac- 
commodation who  pays  the  instrument  may  sue  prior,  but 
not  subsequent  parties  thereon  for  reimbursement. 

Where  a  bill  or  note  is  made  nayable,  or  is  indorsed 
specially  to  a  firm,  all  partners  must  join  in  a  suit  on  the 
instrument.  If  one  of  them  should  die,  the  action  should  be 
brought  b}^  the  survivors.  If  the  paper  be  indorsed  in 
blank,  either  partner  may  fill  it  up  in  his  own  name  and 
sue  accordingly;  and  if  it  be  indorsed  to  one  member  of  a 
firm,  it  may  be  filled  up  and  suit  brought  in  the  firm  name. 

>  Burch  V.  Daniel,  109  Ga.,  256. 


DEPARTMENT  OF  LAW  105 

The  acceptance  of  a  bill  or  the  giving  of  a  note  suspends 
all  right  of  action  on  the  original  debt  for  which  such  paper 
is  given,  so  long  as  such  instrument  has  not  matured.  When 
it  falls  due  the  right  of  action  is  re^dved  and  the  creditor  or 
holder  has  the  right  to  elect  on  which  liability — whether  the 
original  debt  or  the  acceptance  or  note — he  will  bring  suit. 
If  he  brings  it  on  the  original  debt  he  must  either  produce 
in  court  and  surrender  the  note  or  bill;  or  satisfactorily  ac- 
count for  its  absence  so  as  to  protect  the  debtor  against  a 
negotiation  of  it  before  maturity,  and  a  consequent  subse- 
quent liability  on  it  to  some  innocent  purchaser.  ^ 

§111.  Joint  Parties. — A  copartner  cannot  sue  a  firm  of 
which  he  is  a  member  on  an  instrument  payable  by  it  to  him- 
self, for  that  would  in  fact  be  suing  himself;  but  if  a  firm 
make  an  instrument  payable  to  the  order  of  a  copartner,  and 
he  indorse  it  to  another  party  not  a  partner,  the  indorsee 
may  sue  the  firm.  So,  joint  parties  who  are  not  partners — 
that  is  to  say  individual  parties  to  whom  paper  is  payable 
jointly — must  all  unite  in  an  action  if  they  be  living,  and  in 
the  event  of  the  death  of  one  of  them  the  remedies  survive 
to  those  living,  without  uniting  in  the  action  the  personal 
representative  of  the  deceased  joint  party.  ^ 

One  not  originally  a  party  to  a  bill  who  pays  it  supra 
protest,  may  sue  all  parties  not  subsequent  to  the  party  for 
whose  honor  he  has  paid.  A  banker  who  pays  the  accep- 
tance of  a  customer  payable  at  his  bank,  which  has  not  been 
provided  for  by  the  customer,  is  not  such  a  party,  however. 

§112.  Divisibility  of  Cause  of  Action. — An  entire  de- 
mand cannot  be  divided  and  suits  maintained  on  its  several 
parts.  Such  a  claim  is  in  other  words  legally  indivisible; 
and  if  sued  upon  must  be  sued  on  as  a  whole.  For  instance 
an  instrument  for  $500  due  according  to  its  terms  on  a  fixed 
date  and  not  in  installments,  cannot  be  separated  into  five 
claims  of  $100  each — or  into  any  other  siuns — and  suit 
brought  upon  each  division  or  part. 

A  recovery  for  part  of  such  demand,  if  it  is  divided  and 
suit  brought  upon  one  portion  thereof,  will  bar  an  action  for 
the  remainder,  provided  it  be  due  at  the  time  the  first  action 

» Allen  V.  Tate,  58  Miss.,  586.  'Allen  v.  Tate,  supra. 


106       AMERICAN  EXTENSION  UNIVERSITY 

is  brought.  *  Of  course,  if  by  its  terms  an  instrument  is 
payable  by  installments  and  only  so,  suit  may  be  maintained 
on  each  installment  that  is  unpaid  when  due. 

§113.  Instruments  to  Bearer  or  With  Blank  Indorse- 
ments.— ^An  instrument  payable  to  bearer,  or  indorsed  in 
blank,  may  be  sued  on  in  the  name  of  the  nominal  or  actual 
holder.  Mere  possession  of  such  paper  is  prima  facie  evi- 
dence of  the  possessor's  right  to  sue  on  it.  This  right  can- 
not be  rebutted  by  proof  that  he  actually  has  no  beneficial 
interest  in  the  paper  unless  there  be  an  allegation  in  the 
answer,  of  mala  fides  on  the  part  of  the  plaintiff.  Proof 
of  such  bad  faith,  and  of  wrongful  possession  of  the  paper 
would  however  defeat  a  holder's  right  to  recover.  ^ 

A  holder  of  paper  under  an  indorsement  in  blank  may 
fiU  it  up  in  his  own  name  thus  making  the  paper  payable 
to  himself  this  being  but  a  formality  which  as  we  have 
already  learned  such  a  holder  has  a  legal  right  to  do.  Or  he 
need  not  fill  up  the  indorsement  at  all,  as  the  suing  on  it  is 
evidence  of  his  intention  to  treat  the  indorser  who  is  sued, 
as  a  transferror  and  indorser  to  himself.  ® 

§114.  Instruments  Specially  Indorsed. — ^Where  an  in- 
strument is  specially  indorsed  to  the  holder  and  is  not  pay- 
able to  bearer  or  indorsed  in  blank,  a  nominal  holder  merely 
cannot,  unless  authorized  by  statute,  sue  in  his  own  name. 
This  for  the  reason  that  the  legal  title  to  the  paper  is  still 
in  the  transferror  in  such  a  case,  and  his  name  must  be  used 
as  plaintiff,  as  the  real  party  in  interest,  to  maintain  an 
action.  Where  however  an  instrument  specifically  indorsed 
to  a  certain  named  person  is  in  the  possession  of  such  person 
as  the  legal  holder  and  owner  thereof,  of  course  he  may  in 
his  own  name  maintain  legal  action  thereon. 

•  §115.  What  Constitutes  Right  to  Sue. — The  right  to 
sue  in  one's  own  name  must  exist  at  the  time  suit  is 
brought.  An  indorsement  made  afterwards  but  before  the 
trial,  whereby  a  party  for  the  first  time  then  obtains  such 
right,  will  not  be  sufficient.  "^  The  right  to  maintain  legal 
action  must  continue  in  the  plaintiff  during  the  life  of  the 

♦McLeod  V.  Snyder,  110  Mo.,  298.  •  Poorman  v.  Mills,  35  Cal.,  118. 

'Illinois  Conference   v.   Plagge,    177      *  Alabama  Terminal  etc.  Co.  v.  Knox, 
UL,  431.  115  Ala.,  567. 


DEPARTMENT  OF  LAW  107 

suit.  Hence  a  transfer  of  the  instrument  sued  upon  during 
the  pendency  of  a  suit  thereon  operates  as  a  discontinuance 
of  such  action  unless  the  new  purchaser  of  the  instrument 
is  duly  substituted  as  plaintiff. 

Where  there  are  several  indorsers,  the  action  need  not 
be  in  the  name  of  the  last  holder.  Any  indorser  may  sue,  by 
striking  out  the  subsequent  indorsements.  A  holder's  own 
indorsement  if  left  uncanceled,  will  not  prevent  his  right  of 
recovery,  as  his  possession  of  the  paper  will  raise  a  legal  pre- 
sumption that  he  has  not  delivered  it  under  the  indorsement. 
And  suit  may  be  brought  even  without  actual  possession  of 
the  instrument,  if  the  indorsee  holds  it  merely  as  agent  or 
trustee.  But  if  the  title  to  the  bill,  as  well  as  its  possession, 
be  in  another,  an  indorser  cannot  maintain  an  action 
thereon.  ! '       li"  ^'  ^^i^ 

An  action  should  be  brought  by  the  party  entitled  to 
receive  the  proceeds  of  the  instrument.  A  defendant  in 
such  case  however  cannot  question  the  plaintiff's  title 
except  on  the  ground  of  bad  faith  in  the  plaintiff,  or  of  sub- 
stantial prejudice  therefrom  to  the  defendant's  rights,  ® 
imless  it  be  in  a  jurisdiction  where  it  is  required  by  statute 
that  the  suit  be  brought  by  the  real  party  in  interest.  As 
a  general  rule  one  who  holds  under  a  blank  indorsement  is 
the  real  party  in  interest,  but  a  defendant  may  show  that  a 
plaintiff  seemingly  so  holding  has  in  fact  no  such  title,  for 
although  possession  of  paper,  while  it  lasts,  carries  with  it 
the  presumption  of  title  it  does  not  prevent  proof  that  in 
fact  the  possessor  of  paper  has  no  such  title.  ® 

§116.  Who  May  Be  Sued. — Ordinarily  an  action  can- 
not be  maintained  against  a  party  who  has  indorsed  paper 
subsequent  to  the  plaintiff.  Were  the  rule  otherwise,  a  de- 
fendant in  such  an  action  might  as  indorser,  recover  back 
from  the  plaintiff — on  the  latter 's  liability  as  an  indorser 
previous  to  the  defendant — the  very  amount  recovered  from 
him.  In  the  case  of  an  original  indorsement  to  the  defend- 
ant, without  recourse,  or  without  consideration,  who  had  in- 
dorsed the  paper  back  to  the  plaintiff  absolutely  and  for 
value,  or  where  other  special  circumstances  of  like  legal 
import  arise,  this  would  not  apply. 

•  Caldwell  y.  Lawrence,  84  m.,  161.         *  Hays  v.  Hammond,  74  N.  Y.,  486. 


108       AMERICAN  EXTENSION  UNIVERSITY 

/An  indorser  cannot  sue  an  acceptor  or  maker  until  he 
has  paid  the  obligation.i  In  a  suit  by  an  indorser  against  a 
prior  party  to  the  paper,  it  is  necessary,  ("S^s  a  basis  for  his 
right  of  action,Njfor  him  to  show  that  notice  of  non-pajnnent 
and  protest  was  duly  received  by  such  prior  party. 

§117.  When  Right  of  Action  Accrues. — As  soon  as 
payment  is  refused  the  right  of  action  commences,' provided 
that  all  the  necessary  formalities  to  fix  liability  on  mdorsers 
and  others  have  been  complied  with.  It  is  not  necessary 
before  beginning  action  to  wait  until  sufficient  time  elapses 
to  permit  all  parties  to  receive  notice  of  dishonor,  so  long  as 
the  necessary  steps  are  in  fact  taken  to  fix  their  liability 
before  action  is  begun.  ^^ 

'When  a  bill  is  dishonored  for  non-acceptance,  a  right 

of  action  accrues  at  once  against  the  drawer  and  the  indor- 

^sers,  provided  the  proper  steps  are  taken  to  render  them 

iegally  liable.    It  is  not  necessary  to  wait  for  the  maturity 

of  the  paper,  in  such  cases.  ■  -    - 

§118.  When  Right  of  Action  Expires.— (yVhen  the 
right  of  action  expires  depends  largely  upon  the  provisions 
of  the  statute  of  limitations  in  force  in  the  state  where  the 
right  arose. )  While  the  length  of  time  in  which  an  action 
can  be  maintained  under  such  statute  varies  in  the  several 
jurisdictions,  yet  under  all,  (the  statute  always  begins  to 
run  from  the  day  when  the  right  of  action  accrues.) 

Whether  payment  by  one  of  the  makers  of  a  joint  or  a 
joint  and  several  obligation  takes  it  out  of  the  statute  as  to 
the  others,  is  a  rather  vexed  question.  The  better  opinion 
on  this  subject  is  that  if  the  obligation  be  joint  such  pay- 
ment will  extend  the  statutory  limitations  as  to  the  other 
makers,  but  that  if  it  be  joint  and  several,  it  will  not. 

rWhere  several  are  jointly  bound  on  an  instrument, 
service  of  process  in  an  action  begun  thereon  on  one  of  the 
parties  will  stop  the  running  of  the  statute  as  to  all.) 

('Where  one  of  two  or  more  sureties  pays  the  surety  obli- 
gation before  it  is  barred  by  the  statute,  such  surety  may 
maintain  an  action  against  his  co-surety  or  co-sureties  for 
contribution  of  payment  even  after  the  bar  of  the  statute 
be  complete  as  to  the  original  obligation.  •  (The  reason  for 

"Shed  V.  Britt,  1  Pick.  (Mass.),  401. 


DEPARTMENT  OF  LAW  109 

this  is  that  such  surety's  right  in  that  action  accrues  only 
from  the  date  of  the  payment  by  him.  ^l) 

A  payment  by  a  surety  however  will  not  revive  an  obli- 
gation as  against  the  principal  debtor,  if  it  be  already  barred 
by  the  statute  of  limitations.  > 

('Most  states  also  have  a  provision  tha:t  the  operation  of 
this  statute  is  suspended  as  against  a  person,  against  whom 
a  right  of  action  accrues,  if  he  is  out  of  the  state  and  hence 
beyond  the  jurisdiction  of  its  courts,  until  his  return  to  the 
state.)  /The  period  during  which  such  party  is  absent  from 
the  state  is  not,  therefore  included  in  the  computation  of 
time  under  the  statute.^  Such  a  provision  does  not  refer 
to  a  temporary  absence  with  one's  fixed  residence  within 
the  state,  but  to  an  established  domicile  out  of  the  state  and 
axesiding  out  of  the  state.  ^- 

Unless  special  circiunstances  arise  to  change  the  rule 
the  statute  of  limitations  of  the  place  where  a  suit  is  brought 
governs  the  right  of  action.^ 

§119.  Revival  of  Right  of  Action.— jan  acknowledge- 
ment of  a  debt,  or  a  new  promise  to  pay  k  debt,  made  by  a 
debtor  after  the  right  of  action  thereon  is  barred  by  the 
statute  of  limitations,  will  revive  the  right  of  action  so  that 
the  time  under  the  statute  will  then  begin  to  run  anew  foom 
the  date  of  such  acknowledgement  or  new  promise.y(The 
acknowledgement  must  be  such  as  to  imply  a  promise  to  pay 
the  barred  debt  and  must  be  of  such  a  character  as  will 
clearly  identify  the  debt;  furthermore  it  must  be  uncon- 
ditionalJ 

In  most  states  it  is  provided  by  statute  that  such 
acknowledgement  or  promise  must  be  in  writing  and  signed 
by  the  person  to  be  charged.  Prior  to  the  passage  of  such 
acts,  and  in  jurisdictions  where  they  do  not  exist,  a  verbal 
promise  to  pay  is  sufficient.  ^*  ^ 

.An  acknowledgement  or  promise  made  to  one  party  to 
an  mstrument  inm*es  to  the  benefit  of  all  subsequent  parties 
thereof  but  does  not  apply  to  prior  parties.  /  Part  payment 
of  an  outlawed  debt  amounts  to  an  acknowledgement  of  the 
debt,  from  which  a  promise  will  be  implied  by  law;  as  will 
a  payment  of  interest  on  a  debt.     But  realizing  on  collateral 

"  McCrady  v.  Jones,  44  S.  C,  406.  "  Bribcoe  v.  Anketell,  28  Miss.,  371. 

•^Farr  v.  Durant,  90  Wis.,  341. 


110       AMERICAN  EXTENSION  UNIVERSITY 

given  to  secure  the  original  debt  will  not  affect  the  statute 
as  applying  to  such  debt.  In  fact  no  payment  but  a  volun- 
tary one  directly  made  or  authorized  will  suffice  to  revive  a 
barred  indebtedness. 

(The  burden  of  proving  such  an  acknowledgement  or 
new  promise  is  on  the  party  alleging  it. '  Such  proof  need 
not  be  in  writing  unless  so  required  by  statute  although 
such  evidence  is  always  most  conclusive. 

§120.  Several  Actions  on  One  Instrument. — At  com- 
mon law  it  was  possible  for  a  holder  of  dishonored  paper  to 
bring  simultaneous  actions  against  all  parties  liable  to  him 
thereon.  This  is  the  rule  at  present  although  it  is  possible 
to  sue  the  maker  and  indorsers  separately  if  the  holder  so 
elects.  Judgment  recovered  against  one  indorser  and  not 
satisfied,  is  no  bar  to  a  subsequent  action  by  the  same  plain- 
tiff against  the  maker.  And  an  action  may  be  maintained 
against  an  indorser  even  after  judgment  is  had  against  the 
maker,  where  the  judgment  has  not  been  satisfied.  ^* 

§121.  Action  Against  Indorser  and  Surety. — ^Where 
an  indorser  sues  a  prior  indorser  for  money  paid  on  an  in- 
strument whereon  both  are  liable  it  is  necessary  for  him  to 
prove  that  he  has  actually  made  payment  of  the  paper.  It 
will  not  be  sufficient  for  him  to  show  that  judgment  has  been 
previoiisly  recovered  by  his  indorsee  against  several  indor 
sers.  Oidy  the  actual  liquidation  of  the  indebtedness  by 
him  gives  him  a  right  of  action  against  the  prior  parties. 
A  surety  on  an  instrument  cannot  be  sued  in  most  instances 
until  due  diligence  has  been  used  to  collect  from  the  maker 
or  principal  debtor. 

§122.  Joint  and  Several  Liability. — ^Parties  jointly 
liable  should  be  jointly  sued.  Successive  indorsers  are  not 
joint  makers,  hence  need  not  be  sued  jointly  although  they 
may  be  joined  in  one  action  if  it  is  deemed  desirable  to  do 
so.  Judgment  against  one  joint  maker  will  be  a  bar  to 
further  action  against  the  other.  ^'^ 

Where  however  the  liability  is  joint  and  several  separ- 
ate actions  may  be  brought  against  the  several  makers,  and 
as  to  the  joint  makers  they  should  be  proceeded  against 

"Righter  v.  Van  Riper,  3  N.  J.  Law.,  «  Holman  v.  Langtree,  40  Ind.,  349. 
287. 


DEPARTMENT  OF  LAW  111 

jointly.  On  liability  that  is  both  joint  and  several  as  to 
certain  parties,  actions  may  be  maintained  against  them 
either  jointly  or  severally  at  the  option  of  the  holder  of  the 
paper. 

Under  statute  at  the  present  time  in  most  of  the  states, 
and  in  England,  all  parties  to  a  bill  or  a  note  may  be  joined 
as  defendants  in  one  action.  In  some  instances  sm'eties  are 
also  expressly  included.  Makers  and  indorsers  can  now  be 
sued  together  in  one  action.  Without  such  a  statute  succes- 
sive indorsers  could  not  have  been  joined  as  defendants  in 
the  same  action.  ^* 

§123.  Actions  on  Collateral  Securities. — ^What  action 
is  to  be  pursued  regarding  collateral  securities  depends  upon 
the  jurisdiction  in  which  the  question  arises.  It  may  be  said 
generally  however  that  it  is  the  duty  of  the  holder  of  paper 
to  collect  the  collateral  given  to  secure  it  when  it  becomes 
due,  regardless  of  whether  the  instrument  has  matured  or 
not.  Where  collateral  is  received  without  any  special 
agreement  concerning  it,  the  party  receiving  it  is  liable  for 
ordinary  diligence  in  realizing  thereony^^4lis  negligence  in 
that  particular,  especially  if  thereby  the  security  is  rendered 
valueless,  discharges  the  debt  which  it  secured.  ^^ 

§124.  Actions  on  Lost  Paper .^In  the  event  of  the  loss 
of  commercial  paper  the  owner  should  at  once  notify  the 
parties  to  it,  so  as  to  prevent  their  taking  it  up  without 
due  inquiry.  An  advertisement  in  the  public  press  or  by 
posters  or  other  form  of  public  notice  of  the  loss,  is  one 
method  of  giving  notice  to  others  to  avoid  their  receiving 
such  paper..  In  some  states  an  allegation  that  such  notice 
has  been  ^iven  is  necessary  in  an  action  on  such  paper, 
before  recovery  can  be  had  on  it.  If  the  instrument  has 
been  absolutely  destroyed  however,  as  by  fire,  or  through 
error  or  otherwise,  and  the  proof  thereof  is  clear  and  con- 
vincing, no  such  allegation  is  necessary.  While  ordinarily 
in  the  event  of  loss,  indemnity  to  protect  the  payor  in  case 
the  instrument  later  turns  up  in  other  hands  is  required  to 
be  given  before  payment  will  be  enforced,  in  the  case  of  the 
sure  destruction  of  paper  no  indemnity  is  as  a  rule  required. 

"Wolf  V.  Hostetter,  182  Pa.  St.,  292.  Iowa,  377. 

"First  Nat.   Bank  v.   O'Connell,    84 


112       AMERICAN  EXTENSION  UNIVERSITY 

§125.  Allowance  of  Interest.-yWliere  interest  is  pro- 
vided for  in  an  instrument,  it  will  be  included  in  the  amount 
recoverable  at  law  in  an  action  on  the  instrument. )  Where 
however  interest  is  not  specifically  provided  for  an  instru- 
f ent  draws  interest  from  the  time  of  its  maturity  at  the  legal 
rate  without  prior  demand. 

iTlie  rate  of  interest  when  allowed  is  governed  by  the 
law  of  the  place  where  the  instrument  is  made  and  in  force 
at  the  time  the  instrument  is  made.  '"When  interest  is  not 
provided  for,  then  the  law  in  effect  at  the  time  of  the  matur- 
ity of  the  paper,  if  it  differs  from  that  affecting  it  at  the 
time  it  was  made,  will  control. 

In  the  case  of  demand  notes  without  express  reserva- 
tion of  interest,  they  bear  interest  from  the  date  of  the 
demand  only;  or  from  the  time  of  the  commencement  of 
suit,  when  no  other  verbal  demand  has  been  made.j 

§126.  Defenses  to  Commercial  Paper. — (a)  In  Gen- 
eral.— All  defenses  to  negotiable  instruments  are  practically 
based  on  three  grounds;  (1)  Repudiation — that  is  to  say, 
that  the  part}^  did  not  execute  the  instrument  set  up;  (2) 
Illegality — that  the  instruments  as  alleged  had  no  legal 
binding  force;  and  (3)  Discharge — that  the  defendant's 
liability  thereon  has  been  discharged  or  modified. 

(b)  Repudiation  of  Instrument.-KForgery  and  altera- 
tion come  under  this  head. )  A  forged  instrument  is  not  the 
contract  of  the  party  named  and  will  involve  no  liability  on 
his  part,  unless  by  some  sanctioning  action  of  his  own  he  is 
estopped  from  setting  up  the  defense. 

An  alteration  to  be  available  must  be  a  material  altera- 
tion, and  if  so  it  will  be  sufficient  to  discharge  all  parties  not 
consenting  to  it,  without  any  allegation  or  proof  of  fraud.  ^^ 
If  an  alteration  is  immaterial  and  does  not  in  any  way  vary 
the  meaning  of  the  paper  or  the  liability  of  the  parties  there- 
to, it  will  not  invalidate  it.  But  any  alteration  which 
changes  the  operation  of  the  instrument  or  the  liability  of 
the  parties  is  material,  whether  the  change  be  prejudicial  to 
the  parties  or  not. 

Proof  of  either  of  these  facts  will  constitute  a  good  de- 

"Eckert  v.  Pirkel,  59  Iowa,  545. 


DEPARTMENT  OF  LAW  113 

fense  even  against  a  bona  fide  holder  before  maturity,  as 
such  fact  renders  the  paper  void.  ^^ 

(c)  Illegality  of  Instrument. — Illegality  and  fraud  be- 
long to  the  second  class  of  defenses  referred  to.  In  the  ear- 
lier lessons  we  have  discussed  the  effect  on  a  contract,  and 
on  commercial  paper  in  particular,  of  illegal  consideration. 
It  is  not  necessary  to  dwell  farther  thereon  in  this  connec- 
tion, except  to  say  that  where  a  consideration  for  paper  is 
clearly  illegal,  that  fact  is  always  a  good  defense  thereto. 

Where  the  exaction  of  usury  is  prohibited  the  fact  of 
usirry  in  the  making  of  a  note,  avoids  it  as  against  all 
parties.  The  question  of  usury  is  one  difficult  to  discuss 
in  general  terms  for  in  many  of  our  states  it  has  been  prac- 
tically done  SLWSLj  with  by  statute,  and  in  others  its  effect 
is  regulated  so  that  the  entire  matter  rests  on  statute  for  its 
construction  and  effect.  It  may  be  said,  however,  that 
where  by  mistake  a  note  is  made  to  draw  interest  in  too 
large  a  sum,  it  will  not  be  held  usurious  where  the  mistake 
is  clearly  shown  and  no  usurious  intent  existed. 

Fraud  vitiates  commercial  paper  the  same  as  it  does 
all  other  contracts.  It  may  be  accomplished  b,y  false  rep- 
resentation. If  so  such  representations  must  be  material 
to  the  obtaining  of  the  paper  and  must  have  induced  the 
party  to  execute  or  deliver  it.  The  fraudulent  concealment 
of  material  fact  has  the  same  legal  effect  as  a  direct  false 
statement. 

/^raud  that  renders  an  instrument  void  may  be  either 
in  its  inception  or  in  its  subsequent  transfer^  /Hence  paper 
originally  obtained  b}^  fraud  or  for  a  fraudulent  considera- 
tion, will  be  held  void  if  that  act  be  pleaded  as  a  defense  and 
is  proven.  ,/ 

It  will  be  no  defense  to  the  maker  of  an  instrument  to 
show  that  an  indorsement  thereon  was  procured  by  fraud 
against  the  indorser;  nor  can  an  indorser  set  up  that  the 
instrument  was  procured  by  fraud  or  duress  upon  the 
maker.^i  A  guarantor  however  may  set  up  that  the  note 
guaranteed  by  him  was  obtained  by  fraud  from  his  prin- 
cipal. ^®  And  where  one  in  good  faith  deposits  paper  in 
a  bank  for  collection  and  the  bank  is  known  by  its  officers 

"Gettysburg  Nat.  Bank  v.  Chisholm,     '  Putnam  v.  Schuyler,  4  Hun.  (N.  Y.), 
169  Pa.  St.,  564.  loti. 


114       AMERICAN  EXTENSION  UNIVERSITY 

to  be  insolvent  at  the  time  it  receives  such  paper,  it  will 
amount  to  a  fraud  on  the  part  of  the  bank  and  entitle 
the  depositor  to  recover  his  deposits  as  made.  ^^ 

Eraud  to  be  available  as  a  defense  must  be  specially 
pleaded,  and  the  burden  of  proving  the  fraud  alleged  is  on 
the  party  setting  it  up.   ' 

(d)  Discharge  and  Payment. — This  class  of  defenses 
has  been  treated  in  the  preceding  chapter  under  the  same 
heading.  It  is  unnecessary  therefore  to  say  more  here  other 
than  to  emphasize  the  self-evident  fact  that  where  paper 
has  been  paid,  or  legal  liability  thereon  has  been  otherwise 
satisfied,  released,  waived  or  barred,  it  is  a  lawful  defense 
to  an  action  to  collect  same  from  one  so  absolved  from 
liability. 


CHAPTER  Xin. 

THE  NEGOTIABLE  INSTRUMENTS     liAW.  ' 

§127.   Generally. 

128.  Definition. 

129.  Form  and  Interpretation  of  Instruments. 

130.  Consideration. 

131.  Negotiation. 

132.  Rights  or  Holders. 

133.  Liability  of  the  Parties. 

134.  Presentment  for  Payment. 

135.  Notire  of  Dishonor. 

136.  Discharge. 

137.  Bills  of  Exchange. 

138.  Checks. 

§127.  Generally. — As  has  been  pointed  out  from  time 
to  time  in  the  foregoing  lessons  on  this  topic,  there  are 
several  important  points  upon  which  the  courts  of  the 
several  states  have  taken  differing  views;  prescribing  by 
their  decisions  varjdng  rules  of  law  within  their  respective 
jurisdictions  upon  identical  questions  of  fact.  The  reason 
for  this  divergence  of  opinion  is  the  fact  that  the  custom  of 
merchants  in  the  various  sections  of  the  country,  was  not 
uniform  upon  certain  matters,  and  the  courts  while  engaged 
in  the  process  of  building  up  the  law,  in  enforcing  these,  dif- 
ferent mercantile  customs,  established  the  conflicting 
legal  rules. 

*  Cragle  v.  Hadley,  99  N.  Y.,  131. 


DEPARTMENT  OF  LAW  115 

For  instance,  and  to  name  only  a  few  common  points  of 
divergence.  In  some  states  the  affixing  of  a  seal  to  an 
instrument  rendered  it  non-negotiable,  while  in  others  it 
did  not.  Likewise  a  provision  for  the  payment  of  attorney's 
fees  in  case  of  dishonor,  was  held  by  some  states  to  make 
paper  unnegotiable,  while  in  others  it  was  the  reverse. 
Again  some  courts  said  that  the  alteration  of  commercial 
paper  made  it  absolutely  void  even  in  the  hands  of  inno- 
cent holders;  others  held  that  the  latter  could  enforce  it 
according  to  its  original  tenor.  Certain  courts  held  that  a 
check  was  an  assignment  of  the  amount  of  money  called 
therefor,  and  hence  denied  the  drawer  the  right  to  stop 
payment  on  a  check  duly  issued  by  him  , while  the  majority 
of  the  courts  denied  this  doctrine. 

Without  continuing  the  illustrations  farther  it  may  be 
said  that  in  these  days  of  far-reaching  commercial  enter- 
prise, where  business  operations  are  so  greatly  subject  to 
and  dependent  upon  the  use  of  mercantile  paper,  this 
variance  affecting  rights  and  remedies  arising  out  of  such 
paper  was  little  short  of  calamitous.  Consequently  con- 
certed legislative  action  was  sought  by  eminent  commercial 
and  legal  bodies,  to  bring  about  unity  of  rule  and  procedure 
affecting  commercial  instruments. 

The  result  of  this  movement  is  that  since  1895  thirty- 
five  states  and  territories  have  adopted  acts  substantially 
uniform  in  every  controlling  feature,  and  known  as  *'The 
Negotiable  Listruments  Law. ' '  Its  adoption  by  the  remain- 
ing states  at  an  early  day  seems  assured.  ^ 

This  act  created  no  new  law,  the  aim  being  solely  to 
adopt  and  embody  certain  prevailing  rules.  The  law  itself 
declares  that  "in  any  case  not  provided  for  in  this  act,  the 
rules  of  the  law  merchant  shaU  govern."  Accordingly  on 
any  point  omitted  in  that  law,  resort  is  not  to  be  had  to  any 
previous  statute, — as  all  statutes  affecting  commercial  in- 
struments have  been  repealed  in  the  states  adopting  this 

*  The  jurisdictions  that  have  adopted  tana,  Nebraska,  New  Jersey,  New 
thib  law  are:  Alabama,  Arizona,  Mexico,  New  York,  North  Carolina, 
Colorado,  Connecticut,  District  of  North  Dakota,  Ohio,  Oregon, 
Columbia,  Florida,  Hawaii,  Idaho,  Pennsflvania,  Rhode  Island,  Ten- 
Illinois,  Iowa,  Kansas,  Kentucky,  nessee,  Utah,  Virginia,  Washing- 
Louisiana,  Maryland,  Massachu-  ton,  Webt  Virginia,  Wisconsin,  Wy- 
setts,    Michigan,     Missouri,     Mon-  oming. 


116       AMERICAN  EXTENSION  UNIVERSITY 

law — but  to  the  custom  of  merchants  as  recognized  by  the 
courts  of  the  state  where  such  question  arises. 

Taking  this  law  as  it  exists  in  the  majority  of  the  states 
which  have  it,  we  will  now  discuss  its  principal  provisions 
and  distinctions  in  connection  with  what  has  been  said  upon 
the  same  topics  in  our  previous  discussion  of  the  law  af- 
fecting such  instruments.  This  discussion  will  however  be 
only  as  to  the  main  outlines  of  the  law,  the  student  being 
directed  to  the  law  in  his  own  state,  if  it  has  been  there 
adopted,  for  a  full  knowledge  of  same.  ^ 

§128.  Definitions. — The  definitions  and  meaning  of 
terms  as  given  in  this  act  are  substantially  as  we  have  stated 
them  in  these  lessons.  There  are  but  one  or  two  upon  which 
it  may  be  well  to  particularize  at  this  time. 

The  vexing  question  as  to  what  is  or  is  not  a  **  reason- 
able time ' '  within  which  demand  paper  must  be  presented, 
or  otheTmatters  the  culmination  of  which  is  not  specifically 
fixed  otherwise,  must  be  done,  and  which  the  courts  had 
found  it  difficult  to  solve,(is  provided  for  in  this  act  by  the 
provision  that  in  determining  that  question  regard  is  to  be 
had  to  the  nature  of  the  instrument,  the  usage  of  the  trade 
or  business,  if  any,  with  respect  to  which  such  instruments 
are  given,  and  the  facts  of  the  particular  case. 

As  to  when  it  is  necessary  to  present  an  instrument 
falling  due  on  a  Sunday  or  a  legal  holiday — concerning 
which  prior  to  the  adoption  of  this  act  and  in  many  of  the 
states  where  it  is  not  yet  effective  authorities  differed  and 
differ,  some  claiming  that  it  must  be  made  on  the  day  after 
while  others  required  it  to  be  made  the  day  before, — is 
under  this  act  specifically  required  to  be  made  on  the  next 
succeeding  secular  or  business  day. 

§129.    Form  and  Interpretation  of  Instruments. — The 

provisions  of  the  act  regarding  the  form  and  interpretation 
of  instruments  also  follows  the  established  lines  as  we  have 
laid  them  down.  jThe  act  however  goes  somewhat  farther 
than  was  sometime  previously  held,  in  that  it  provides  that 
if  an  instrument  is  no  longer  in  the  possession  of  a  party 

'  It  is  proper  to  note  that  the  section  mentb  Law,   but   are   the  consecu- 

numbers  followed  in  this  topic  are  tlve  section  numbers  of  our  lessons 

not    those    corresponding    to    the  on  this  title, 
sections  of  the  Negotiable  Instru- 


DEPARTMENT  OF  LAW  117 

whose  signature  appears  thereon,  a  valid  and  intentional 
delivery  thereof  by  him  to  another  is  presumed,  until  the 
contrary  be  proved. ) 

If  the  sum  called  for  by  an  instrument  is  expressed  in 
both  words  and  figures,  and  there  is  a  discrepancy  between 
the  two,  the  words  govern,  as  under  the  former  rule.  If  the 
writing  be  ambiguous  or  uncertain,  then  reference  may  "Be 
had  to  the  figures  to  fix  the  amoimt. 

,  If  the  ambiguity  in  an  instrument  be  of  a  character 
that  there  is  a  doubt  whether  it  be  a  bill  or  a  note,  the  holder 
has  the  right  of  election  as  to  which  of  these  he  willregard  it.^ 

Where  a  signature  appears  on  an  instrument,  and  if  it 
be  not  clear  in  what  capacity  the  person  signing  it  intended 
to  become  liable  on  the  paper,  he  will  be  deemed  an  indorser.  > 

§130.  Consideration.-f-The  doctrine  of  consideration 
has  been  largely  extended,  in  that  every  negotiable  instru- 
ment is  under  this  law  deemed  to  have  been  issued  for  a  val- 
uable consideration,  and  each  one  whose  signature  appears 
thereon  is  deemed  to  have  become  a  party  thereto  for  value,/ 

It  has  also  settled  the  question  as  to  whether  an  ex- 
isting or  a  pre-existing  debt  for  which  an  instrument  is 
given,  is  legal  value,  by  answering  it  in  the  affirmative. 

§131.  Negotiation.  —  What  constitutes  negotiation  is 
very  much  simplified  by  this  statute.  It  provides  that  ne- 
gotiation is  the  transfer  of  an  instrunient  from  one  person 
to  another  in  such  manner  as  to  constitute  the  transferee 
the  holder  thereof.")  (If  payable  to  bearer  it  is  negotiated  by 
delivery .V  If  payalne  to  order  it  is  negotiated  by  the  indorse- 
ment of  tlie  holder,  completed  by  delivery^  ^n  indorsement 
must  be  of  the  entire  instrument.^  (Hence  an  indorsement 
purporting  to  transfer  to  the  indorsee  a  part  only  of  the 
amount  payable,  or  purporting  to  transfer  the  instrument 
to  two  or  more  indorsees  severally,  does  not  operate  as  a 
negotiation  of  the  instrument  although  if  an  instrument  be 
paid  in  part,  it  may  be  indorsed  as  to  the  residue.)  Where  a 
person  is  required  to  indorse  in  a  representativie  capacity; 
such  as  cashier,  secretary,  assignee  or  executor,  the  indorse- 
ment by  him  may  be  made  in  such  terms  as  to  negative  hiis 
personal  liability. 

<The  provisions  as  to  the  time  of  indorsement  provide 
that  unless  it  bear  date  after  the  maturity  of  the  instru- 


118       AMERICAlSr  EXTENSION  UNIVERSITY 

ment,  every  negotiation  is  deemed  prima  facie  to  have 
been  made  before  the  instrument  was  due.  Unless  the  con- 
trary appears,  each  indorsement  is  presumed  also  to  have 
been  made  at  the  place  where  the  instrument  is  dated. ' 

§132.  Rights  of  Holders. — ^Who  is  a  holder  in  due 
course,  and  his  rights,  are  clearly  fixed  and  set  forth.  It  is 
provided  that  one  who  takes  under  the  following  conditions 
is  a  holder  in  due  course,  viz. : 

1.  That  the  instrument  is  complete  and  regular  on 
its  face. 

2.  That  the  party  became  the  holder  of  it  before  it  was 
overdue  and  without  notice  that  it  was  previously  dishon- 
ored, if  such  was  the  fact. 

3.  That  he  took  it  in  good  faith  and  for  value. 

4.  That  at  the  time  it  was  negotiated  to  him  he  had  no 
notice  of  any  infirmity  or  defect  in  the  title  of  the  person  ne- 
gotiating it. 

If  an  instrument  payable  on  demand  be  negotiated  an 
unreasonable  time  after  issue,  the  holder  will  not  be  deemed 
a  holder  in  due  course.^  And  if  a  transferee  receive  notice  of 
infirmity  in  the  instrument  or  defect  in  title  of  the  person 
negotiating  it,  before  he  has  paid  the  fuU  amount  agreed 
to  be  paid,  he  is  only  deemed  a  holder  in  due  course  to  the 
extent  of  the  amount  theretofore  paid  by  him. 

The  statute  sets  out  practically  the  same  causes  to 
which  we  have  previously  referred  that  would  make  title 
defective,  and  requires  actual  notice  of  the  infirmity  or  de- 
fect, or  knowledge  of  such  facts  that  one^s  action  in  taking 
an  instrument  amounts  to  bad  faith.  ' 

The  right  of  a  holder  in  due  course  we  have  set  out  as 
well  as  those  of  a  holder  not  in  due  course.  The  statute  pro- 
vides in  this  respect  that  a  holder  who  derives  title  through 
a  holder  in  due  course  who  was  not  himself  a  party  to  any 
fraud  or  illegality  affecting  the  instrument,  has  all  the 
rights  of  such  former  holder  in  respect  to  all  parties  prior 
to  the  latter,  and  every  holder  is  deemed  prima  facie  to  be, 
a  holder  in  due  course.  If  it  be  shown  that  the  title  of  any 
person  who  has  negotiated  an  instrument  be  defective,  the 
holder  must  prove  that  he  or  some  person  under  whom  he 
claims  acquired  title  as  a  holder  in  due  course;  the  rule 
however  not  applying  in  favor  of  a  party  who  became 
bound  prior  to  the  acquisition  of  such  defective  title. 


DEPARTMENT  OF  LAW  119 

§133.  Liability  of  the  Parties. — The  liability  and  war- 
ranties of  the  different  parties,  as  well  as  those  of  a  broker 
or  agent,  are  set  out  under  this  heading,  and  practically  reit- 
erates the  rules  and  the  law  as  has  been  laid  down  in  the 
course  of  these  lessons.  Accordingly  we  have  not  deemed  it 
necessary  to  again  refer  specifically  to  them  here. 

§134.  Presentment  for  Pajnnent. — The  provisions 
under  this  heading  contain  no  additional  features  from  those 
already  described.  The  act  clears  up  however  some  debated 
questions,  as  for  instance  the  provision  that  an  instrument 
at  presentation  must  be  exhibited  to  the  person  from  whom 
payment  is  demanded,  and  when  paid  must  be  delivered  to 
the  party  paying  it;  and  that  where  several  persons  not 
partners  are  primarily  liable  on  an  instrument  and  no  place 
of  payment  be  specified  therein,  presentment  must  be  made 
to  them  all. 

It  is  prescribed  that  delay  in  making  presentment  for 
payment  will  be  excused  when  it  is  caused  by  circumstances 
beyond  the  control  of  the  holder,  and  is  not  imputable  to  his 
default,  misconduct  or  negligence.'.  As  was  stated  during 
the  course  of  the  lessons,  days  of  grace  have  been  abolished. ) 
An  instrument  falling  due  on  Saturday  is  to  be  presented' 
for  payment  on  the  next  succeeding  business  day,  except 
those  payable  on  demand,  which  may  at  the  option  of  the 
holder  be  presented  for  payment  before  twelve  o'clock  noon 
on  Saturday  in  states  making  that  day  a  half  holiday, — 
excepting,  of  course,  when  that  day  is  a  holiday. 

It  is  also  provided  that  if  an  instrument  be  payable 
at  a  bank  it  is  equivalent  to  an  order  on  the  bank  to  pay  the 
same  when  due,  for  the  account  of  the  principal  debtor 
thereon.  Payment  made  at  or  after  the  maturity  of  an  in- 
strument in  good  faith  and  without  notice  that  the  title  of 
the  holder  is  defective  constitutes  payment  in  due  course. 

§135.  Notice  of  Dishonor.  —  Notice  of  dishonor  may 
be  given  by  one  who  is  an  agent  either  in  his  own  name  or 
in  the  name  of  the  party  entitled  to  give  notice,  whether 
that  party  be  his  principal  or  not.  When  it  is  given  by  or 
on  behalf  of  a  party  entitled  to  give  notice,  the  holder  and 
all  parties  subsequent  to  the  party  to  whom  notice  is  given 
receive  the  legal  benefit  of  such  notice.  If  an  instrument 
be  dishonored  in  the  hands  of  an  agent  he  may  give  notice 


120       AMERICAN  EXTENSION  UNIVERSITY 

to  the  parties  liable  thereon  or  to  his  principal.  If  the  notice 
be  given  to  his  principal  it  must  be  within  the  same  time  as 
if  such  agent  were  the  holder,  and  the  principal  upon  receiv- 
ing such  notice  has  the  same  time  in  which  to  give  notice 
to  the  others  on  the  instrument  as  if  such  agent  had  been  an 
independent  holder.  '"When  a  party  is  dead  and  such  death 
be  known,  and  there  be  no  personal  representative  or  he 
cannot  with  diligence  be  found,  notice  sent  to  the  last  resi- 
dence or  last  place  of  business  of  the  deceased  will  suffice.  "> 
Where  parties  live  in  the  same  municipality,  notice  by 
mail  is  specifically  permitted;  but  it  must  be  deposited  in 
the  mail  so  as  to  reach  such  parties  in  the  usual  course  of 
the  mails  on  the  following  day.  If  a  party  to  be  notified 
resides  in  a  different  locality  notice  by  mail  is  to  be  given 
as  we  have  hereinbefore  stated.  ■  Jf  given  otherwise  than 
through  the  mail  then  it  must  be  given  within  the  time  that 
notice  would  have  been  received  in  due  course  of  mail,  if  it 
had  been  duly  and  properly  deposited  in  the  postofficc^The 
term  post  office  includes  that  method  of  depositing  in  reg- 
ular mail  receptacles  to  which  attention  has  been  called.V  If 
these  rules  are  complied  with,  a  miscarriage  of  the  mails 
whereby  a  notice  was  not  in  fact  duly  delivered,  will  not 
legally  affect  the  question  of  due  and  timely  notice. ) (Omis- 
sion to  give  notice  of  dishonor  by  non-acceptance,  does  not 
prejudice  the  rights  of  one  who  is  a  holder  in  due  course 
subsequent  to  such  omission. ; 

f  Where  a  waiver  is  embodied  in  an  instrument  itself,  it 
binds  all  the  parties  thereto,  but  if  written  above  the  signa- 
ture of  an  indorser  it  binds  him  only. .; 

§136.  Discharge.-fin  addition  to  the  methods  of  dis- 
charge we  have  stated  in  the  lessons,  the  Act  provides  that 
any  act  which  will  discharge  a  simple  contract  for  the  pay- 
ment of  money,  discharges  a  negotiable  instrument. ) 

A  holder  has  the  right  at  any  time  to  expressly  re- 
nounce his  rights  against  any  party  to  the  instrument.  If 
such  renunciation  be  absolute  and  unconditional  as  to  the 
principal  debtor,  and  is  made  at  or  after  maturity  of  the 
instrument,  it  discharges  the  instrument.  fA  renunciation, 
however,  does  not  affect  the  rights  of  a  holder  in  due  course 
without  notice.  Unless  the  instrument  be  delivered  up  to 
the  person  primarily  liable  thereon,  a  renunciation  must  be 


DEPARMENT  OF  LAW  121 

in  writing^ 

If  an  instrument  or  any  signature  thereon  appeal*  to  be 
cancelled  and  one  allege  that  such  is  not  really  the  case,  the 
burden  of  proof  lies  on  the  party  alleging  that  such  cancel^ 
lation  was  made  unintentionally,  or  under  a  mistake  or 
mthout  authority .'~'''~~  " 

The  following  are  set  down  as  material  alterations 
such  as  would  be  sufficient  to  effect  a  discharge  of  instru- 
ments: (1)  The  date;  (2)  the  sum  payable,  either  principal 
or  interest;  (3)  the  time  or  place  of  payment;  (4)  the  num- 
ber and  relation  of  the  parties;  (5)  the  medium  of  currency 
in  which  payment  is  to  be  made,  or  which  adds  a  place  of 
payment  where  no  place  of  payment  is  specified,  or  any 
other  change  which  alters  the  effect  of  the  instrument  in 
any  respect. 

/However  if  an  instrument  has  been  materially  altered 
and  is  in  the  hands  of  a  holder  in  due  course  not  a  party  to 
the  alteration,  he  can  enforce  payment  according  to  its  orig- 
inal tenor.^ 

§137.  Bills  of  Exchange. — An  additional  provision  has 
been  incorporated  in  this  act  permitting  the  drawer  or  any 
indorser  of  a  bill  to  insert  thereon  the  name  of  a  person  to 
whom  the  holder  may  resort  in  case  of  need,  in  case  the  bill 
be  dishonored  by  non-acceptance  or  non-payment.  Such 
person  is  known  as  the  "referee  in  case  of  need,"  and  a 
holder  may  or  may  not  resort  to  his  referee  in  case  of  need, 
as  he  sees  fit. 

/An  exception  between  presentment  for  pa}Tnent  and 
presentment  for  acceptance  is  made  in  that  in  the  case  of 
presentment  for  acceptance  when  Saturday  is  not  a  holiday, 
such  presentment  should  be  made  before  noon  on  that  day.  / 

If  there  be  an  acceptance  for  honor  it  may  be  for  a  part 
only  of  the  sum  for  whict  the  bill  is  drawn;  which  differs 
from  a  regular  acceptance  which  must  be  of  the  bill.  Where 
there  has  been  an  acceptance  for  the  honor  of  one  party 
there  may  be  a  further  acceptance  by  a  different  person  for 
the  honor  of  another  party  on  the  paper. 

/If  a  holder  refuses  to  receive  payment  supra  protest 
he  loses  his  right  to  recover  and  of  recourse  against  any 
party  who  would  have  been  discharged  by  such  payment^ 

§138.     Checks. — The  provisions  of  the    act    applicable 


122       AMERICAN  EXTENSION  UNIVERSITY 

to  a  biU  of  exchange  payable  on  demand  apply  to  checks. 
Certification  of  checks  by  the  banks  on  which  they  are 
drawn  is  equivalent  to  an  acceptance.  Where  the  holder 
of  a  check  procures  its  certification  it  discharges  the  drawer 
and  all  indorsers  from  liability  thereon. 


QUIZZER 

ACTIONS  AND  DEFENSES. 

1-§110.  Who  has  the  right  to  sue  on  commercial  paper 
in  his  own  name  ^ 

2-  When  may  a  person  who  holds  in  a  representative 

capacity  so  sue? 

3-  When  may  an  accommodation  indorser  who  has 

paid  the  instrument  sue  thereon? 

4-  When  must  all  the  partners  of  a  firm  join  in  an  ac- 

tion on  paper  transferred  to  the  firm? 

5-  Can  an  action  be  brought  by  the  surviving  part- 

ners, and  under  what  circumstances  ? 

6-  What  course  can  be  pursued  by  a  firm  if  an  instru- 

ment be  indorsed  to  it  in  blank? 

7-  What  effect  as  to  the  right  of  action  on  the  origi- 

nal debt  has  the  acceptance  of  a  bill  or  the 
giviQg  of  a  note  therefor,  have  ? 

8-  Does  the  right  of  action  revive  at  any  time — if  so, 

when? 

9-  Has  the  creditor  then  any  option  as  to  how  to  pro- 

ceed— if  so,  what? 

10-  If  suit  is  brought  on  the  original  debt  what  be- 

comes of  the  instrument  given  to  witness  it,  and 
what  is  the  reason  for  this  proceeding? 

11-§111.  Can  a  co-partner  sue  his  firm  on  an  instrument 
made  by  it  to  himself, — and  why? 

12-  Is  there  any  way  by  which  an  action  can  be 

brought  under  these  circumstances — if  so,  how? 

13-  Who  must  join  in  an  action  on  paper  payable  to 

parties  jointly  who  are  not  co-partners? 

14-  What  is  the  course  to  be  pursued  if  one  of  such 

joint  parties  should  be  dead? 

15-  WTio  are  the  parties  to  an  action  where  paper  is 

paid  by  a  party  supra  protest? 


DEPAETMENT  OF  LAW  123 

16-  Is  a  banker  who  pays  the  acceptance  of  his  cus- 

tomer which  has  been  provided  for  by  the  latter, 
such  a  party? 

17-§112.  Can  several  actions  be  commenced  on  an  entire  de- 
mand? 

18-  What  will  be  the  effect  of  a  recovery  of  part  of 

such  a  demand  if  it  is  divided  and  suit  is  brought 
on  one  part  thereof? 

19-§113.  Can  a  nominal  holder  sue  on  paper  in  his  posses- 
sion— ^if  so,  when? 

20-  What  presumption  arises  in  cases    of    such    pos- 

session?        '  ■  ■ 

21-  What  will  result  on  proof  that  the  holder  has  no 

beneficial  interest  in  the  paper? 

22-  When  will  such  proof  be  permitted? 

23-  What  will  be  the  effect  of  such  proof?     ;  -  c  v//- 

24-  Can  a  holder  under  an  indorsement  in  blank,  fill 

it  up — and  why?  -  '■ 

25-  Is  it  necessary  for  him  to  do  so  ? 

26-  What  presumption  follows  the  beginning  of  an 

action  by  a  holder  against  the  indorser  to  him? 
27- §114.  Can  a  nominal  holder  sue  in  his  own  name  on  an 

instrument  that  is  specially  indorsed ?    -  -' 
28-  Is  this  ever  permitted — if  so,  when? 

29-§115.  When  must  the  right  to  sue  on  paper  in  one's  own 

name  exist?/  ~'    '      >      "    '  ^  -  •  •  ^ 

30-  Will  an  indorsement  made  after  suit  is  brought,  be 

sufficient  to  fix  holder's  right  to  sue  ? 

31-  How  long  must  the  right  of  action  continue  in  the 

plaintiff?-^        '    v   ;,  .       '^        .  . 

32-  What  will  be  the  effect  of  a  transfer  of  the  instru- 

ment sued  upon  during  the  pendency  of  an  ac-, 
tion  thereon?  /  .,     ^  /.  ' 

33-  Where  there  are  several  indorsers  must  a  suit  on 

the  instrument  be  in  the  name  of  the  last 
holder?     .  ..^    ^  -  "  -u.  o— ^ 

34-  May  any  indorser  sue — if  so,  when?  'iuiiXT^K^  -  ^'^ 

35-  Will  the  fact  that  a  holder's  own  indorsement  is 

uncanceled  have  any  effect — and  why? 

36-  May  suit  be  brought  without  actual  possession  of 

the  paper — ^if  so,  when?  .^.^^^iui^  ^,:^^ 


r 


124       AMERICAN  EXTENSION  UNIVERSITY 

37-  Will  the  fact  that  the  paper,  and  the  title  to  it, 

was  in  another  make   any  difference — if   so, 
what? 

38-  Who  should  bring  an  action  on  a  commercial  in- 

strument ? 

39-  Can  a  defendant  question  the  plaintiff's  title  to 

paper  in  his  possession  1 

40-  If  your  answer  to  the  last  question  be  in  the  nega- 

tive, state  when  it  can  be  done  if  at  all. 

41-  What  is  the  general  presumption  in  favor  of  one 

who  holds  paper  under  a  blank  indorsement? 

42-  Is  proof  rebutting  such  presumption  permitted — 

if  so,  when? 
43-§116.  Can  an  action  be  maintained  ordinarily  against  a 
party  to  an  instrument  subsequent  to  the  plain- 
tiff?   Give  reason  for  answer. 

44-  When  may  this  be  done,  if  at  all? 

45-  What  must  an  indorser  show  as    a  basis  of  his 

right  to  sue  the  maker  or  acceptor? 
.  46-  If  an  indorser  sue  a  prior  part}^  on  the  paper, 

what  is  it  necessary  for  him  to  show  as  a  basis 

of  his  right  of  action? 
47-§117.  When  does  a  right  of  action  commence,  and  on 

what  does  it  depend? 
:  48-  Is  it  necessary  to  wait  until  time  shall  elapse  for 

all  parties  to  have  received  notice  of  dishonor 

before  beginning  action? 

49-  When  does  the  right  of  action  accrue  where  a  bill 

has  been  dishonored  for  acceptance? 

50-  Is  it  necessary  in  such  a  case  to  wait  until  the 

maturity  of  the  instrument  ? 
51-§118.  Upon  what  does  the  time  of  expiration  of  a  right 
of  action  depend? 

52-  A^Hien  does  the  statute  of  limitations  begin  to  run 

against  a  right  of  action? 

53-  If  an  obligation  be  joint,  will  a  payment  by  one 

of  the  joint  obligers  take  it  out  of  the  statute? 
If  it  be  several,  what  will  be  the  effect  ? 

54-  What  effect  will  service  of  process  on  one  of  sev- 

eral joint  parties  have  as  to  the  operation  of  the 
statute  against  the  others? 


DEPARTMENT  OF  LAW  125 

55-  If  one  of  several  sureties  make  a  payment  before 

the  obligation  is  barred  by  the  statute,  can  he 
maintain  an  action  against  his  co-sureties  after 
the  statute  has  barred  the  original  obligation — 
and  why? 

56-  Will  a  payment  by  a  surety  on  paper  barred  by 

the  statute  revive  it  against  his  principal? 

57-  When  is  the  operation  of  the  statute  of  limita- 

tions suspended  as  against  a  debtor — and  for 
how  long? 

58-  What  kind  of  non-residence  in  the  state  is  con- 

templated by  the  statute  as  suspending  its 
operation? 

59-  What  statute  of  limitations  controls  an  action? 
60-§119.  What  is  necessary  to  revive  a  right  of  action  once 

outlawed? 

61-  Wlien  will  the  statute  then  begin  to  run  anew 

against  a  right  of  action? 

62-  What  must  be  the  character  of  an  acknowledg- 

ment of,  or  a  new  promise  to  pay,  a  debt  to 
remove  the  bar  of  the  statute? 

63-  In  what  form  must  the  acknowledgment  or  new 

promise  be  expressed? 

64-  Is  a  verbal  promise  ever  sufficient — if  so,  when? 

65-  What  will  be  the  effect  of  a  new  promise  or  an 

acknowledgmnet  of  indebtedness  made  to  one 
of  several  parties  who  are  creditors  ? 

66-  What  will  be  the  effect  of  part  payment  of  an 

outlawed  claim? 

67-  What  the  payment  of  interest  on  such  a  claim? 

68-  Will  realizing  on  collateral  given  with  an  original 

debt,  affect  the  running  of  the  statute  ? 

69-  What  kind  of  pa^^ment  is  necessary  to  revive  a 

barred  debt  ? 

70-  On  whom  is  the  burden  of  proving  an  acknowl- 

edgment of  indebtedness  or  a  new  promise 
to  pay? 

71-  Ma,v  such  promise  be  proven  by  parol? 
72-§120.  When  if  ever  was  it  possible  for  a  holder  to  bring 

simultaneous  actions  as:ainst  all  parties  liable 
to  him  on  dishonored  paper? 


126       AMERICAN  EXTENSION  UNIVERSITY 

73-  Can  the  maker  and  indorsers  be  sued  separately? 

74-  Will  an  unsatisfied  judgment  against  an  indorser 

now  be  a  bar  to  an  action  by  the  same  party 
against  the  maker? 

75-  Can  an  action  be  maintained  against  an  indorser 

after  judgment  is  had  against  the  maker? 
76-§121.  If  an  indorser  sue  a  prior  indorser  for  money 
paid  by  him,  what  is  it  necessary  for  him  to 
prove  ? 

77-  Will  it  be  sufficient  in  such  a  case  for  such  in- 

dorser to  show  a  previous  judgment  recovered 
against  several  indorsers  by  his  indorsee  ? 

78-  What  is  necessary  before  recovery  can  be  had 

against  a  surety? 
79-§122.  How  should  those  jointly  liable  be  sued? 

80-  Are  successive  indorsers  joint  makers? 

81-  Will  a  judgment  against  one  joint  maker  affect 

the  other  joint  makers? 

82-  Should  several  makers  of  the  one  instrument  be 

proceeded  against  in  the  same  way? 

83-  Where  the  liability  is   both  joint   and   several 

what  course  is  to  be  pursued? 

84-  What  is  now  the  general  rule  as  to  the  joining  of 

parties  ? 

85-  Under  this  rule  can  makers  and  indorsers  now  be 

joined  in  the  one  action? 

86-  WTiat  is  it  that  makes  this  possible? 

87-§123.  Upon  what  does  the  course  to  be  pursued  regard- 
ing collateral  depend? 

88-  What  is  the  duty  of  the  holder  regarding   col- 

lateral when  it  becomes  due  ? 

89-  Does  the  maturity  of  the  principal  instrument  af- 

fect this  course  ? 

90-  What  is  the  rule  where  such  collateral  is  received 

without  any  special  agreement  ? 

91-  What  will  be  the  result  of  negligence  in  realizing 

on  collateral? 
92- §124.  What  should  be  done  in  the  event  of  the  loss  of  a 
bill  or  note  ? 

93-  What  is  the  reason  for  this  ? 

94-  Is  a  public  advertisement  a  proper  form  of  notice 

to  give  concerning  lost  instruments  ? 


DEPARTMENT  OF  LAW  127 

95-  Is  it  ever  necessary  in  an  action  on  lost  paper  to 

allege  such  a  notice — if  so,  when? 

96-  Is  this  necessary  if  the  paper  be  clearly  shown  to 

have  been  destroyed*? 

97-  What  is  the  rule  regarding  giving  indemnity 

against  lost  paper  in  each  of  these  cases  *? 
98-§125.  Where  the  instrument  provides  for  interest  can  it 

be  included  in  the  amount  recoverable  ? 
99-  If  interest  be  not  specifically  provided  for  does 

the  instrument    draw    interest — if    so,    from 

when? 

100-  Is  it  necessary  to  make  a  prior  demand  for  it  in 

such  a  case  ? 

101-  What  law  governs  the  rate  of  interest  where  in- 

terest is  provided  for? 

102-  When  it  is  not  provided  for  what  law  governs? 

103-  What  is  the  rule  as  to  interest  on  demand  notes 

where  it  is  not  expressly  reserved? 

104-§126.  What  are  the  grounds  on  which  defenses  to  ne- 
gotiable instruments  are  based? 

105- (a)  Under  which  of  the  heads  you  name  would  you 
place  forgery  and  alteration  of  instruments? 

106- (b)     Why  should  you  place  forgery  under  this  head? 

107-  Is  a  party  ever  estopped  from  setting  up  this  de- 

fense— ^if  so,  when? 

108-  What  kind  of  alteration  is  necessary  to  consti- 

tute such  a  defense? 

109-  When  is  the  alteration    of    an    instrument    a 

defense? 

110-  Is  it  necessary  to  prove  fraud  in  such  a  case  ? 

111-  What  kind  of  alteration  is  considered  material? 

112-  How  would  proof  of  these  facts  affect  a  bona  fide 

holder  before  matiu-ity? 
113- (c)     To  which  of  the  classes  of  defenses  does  illegality 
and  fraud  belong? 

114-  What  is  the  rule  where  usury  exists  ? 

115-  On  what  does  the  question  of  usury  depend? 

116-  If  a  note  be  drawn  by  mistake  for  an  amount  that 

would  be  usurious,  what  will  be  the  effect? 

117-  Does  fraud  vitiate  commercial  paper? 

118-  Of  what  may  the  fraud  consist? 

119-  What  must  be  its  character? 


128       AMERICAN  EXTENSION  UNIVERSITY 

120-  Is  the  time  of  the  fraud  material,  or  does  it  relate 

to  the  inception  or  the  indorsement — state  your 
understanding  as  to  this,  fully'? 

121-  If  a  maker  show  that  an  indorsement  was  pro- 

cured by  fraud  will  it  be  a  good  defense  as  to 
him? 

122-  Can  the  indorsers  set  up  as  a  defense  a  fraud  per- 

petrated on  the  maker? 

123-  How  will  this  state  of  facts  affect  a  guarantoi  T 

124-  If  a  deposit  be  made  in  a  bank,  known  by  its  offi- 

cials to  be  insolvent  at  the  time,  what  rights  has 
the  depositor? 

125-  To  make  fraud  available  as  a  defense  how  must  it 

be  pleaded? 

126-  On  whom  is  the  burden  of  proving  the  fraud  ? 
127- (d)     What  can  j^ou  say  as  to  discharge  and  paj^ment  of 

paper  as  a  defense  to  an  action  thereon? 


THE    NEGOTIABLE    INSTRUMENTS  LAW. 

1-§127.  What  can  you  say  as  to  the  lack  of  uniformity  on 
important  points  of  judicial  decisions  affecting 
commercial  instruments  ? 

2-  What  was  the  reason  of  this  divergence? 

3-  Name  some  of  the  points  on  which  there  was  such 

divergence  ? 

4-  What   effect   did  this    divergence    have    upon 

modern  business  interests — and  why? 

5-  What  resulted  therefrom  and  what  was  the  final 

outcome  ? 

6-  Did  the  Negotiable  Instruments  Law  create  new 

law — if  not,  what  did  it  consummate? 

7-  Is  your  state  one  of  those  that  has  adopted  this 

law? 

8-  Upon  points  not  covered  by  this  law  to  what  must 

resort  be  had  in  determining  same — and  why  ? 

9-  To  what  must  regard  be  had  in  determining  the 

question  of  reasonable  time  ? 
10- §128.  Wliere  this  act  is  effective  when  is  an  instrument 
due  on  Sunday  or  a  holiday  to  be  presented? 
11-§129.    Wliat  is  presumed  if  an  instrument  be  no  longer 
in  the  possession  of  a  person  whose  name  ap- 
pears thereon? 


DEPARTMENT  OF  LAW  129 

12-  If  the  sum  to  be  paid  is  expressed  in  both  words 

and  figures,  and  there  is  a  discrepancy  between 
the  two,  which  governs  ? 

13-  When  do  figures  therein  have  any  affect? 

14-  If  there  be  a  doubt  as  to  whether  an  instrument  is 

a  bill  or  a  note,  has  the   holder   any   right   of 
election — if  so,  what  ? 

15-  If  a  signature  appear  in  an  instrument  and  there 

is  doubt  as  to  what  liability  the  person  intended 
to  assume  therebv,  to  what  liabilitv  will  he  be 
held? 
16-§130.     Is  there  now  any  presumption  as  to  consideration 
— if  so,  what  ? 

17-  What  is  presumed  in  favor  of  one  whose  signature 

appears  on  an  instrument  ? 

18-  Is  an  existing  or  pre-existing  debt  deemed  a  val- 

uable consideration? 
19-§131.     How  is  negotiation  defined  by  this  statute?  State 
fully. 

20-  What  part  of  an  instrument  may  be  transferred 

by  indorsement  ? 

21-  Will  an  indorsement   transferring  part   of  the 

amount  payable  thereby  be  good? 

22-  Will  an  indorsement  to  two  or  more  indorsees  sev- 

erally be  a  negotiation  ? 

23-  How  is  this  affected  where  part  of  the  amount 

called  for  by  an  instrument  has  been  paid? 

24-  Can  one  who  indorses  in  a  representative  capacity 

negative  his  personal  liability — if  so,  how? 

25-  When  is  an  indorsement  presumed  to  have  been 

made? 

26-  Is  there  any  exception  as  to  this — if  so,  when  ? 

27-  Is  there  any  presumption  as  to  the  place  where 

each  indorsement  is  made — if  so,  what? 
28-§132.     Under  what  conditions  does  a  person  become  a 
holder  in  due  course  ? 

29-  When  will  one  who  takes  paper  payable  on  de- 

mand not  be  deemed  a  holder  in  due  course? 

30-  If  a  transferee  receive  notice  of  infirmity  in  an  in- 

strument, or  a  defect  in  the  title  of  the  person 
negotiating  it  before  the  full  amount  has  been 
paid  by  him,  what  is  the  result  ? 


130       AMERICAN  EXTENSION  UNIVERSITY 

31-  What  is  required  to  make  tlie  title  to  the  instru- 

ment defective  1 

32-  What  is  the  title  of  a  holder  who  derives  through 

a  holder  in  due  course,  who  is  not  himself  a 
party  to  any  fraud  or  illegality  affecting  the 
instrument  ? 

33-  What  is  presumed  to  be  the  title  of  each  holder? 

34-  If  the  title  of  a  person  who  negotiated  an  instru- 

ment be  defective  what  is  the  holder  required  to 
prove? 

35-  What  exception  is  there  to  this  rule? 

36-§133.  What  can  you  say  as  to  the  provisions  of  this  Sict 
concerning  the  liability  of  parties? 

37- §134.  What  is  the  rule  as  to  possession  of  an  instru- 
ment on  presentment  for  payment? 

38-  Where  there  are  several  persons  not  partners  li- 

able primarily  on  an  instrument,  and  no  place 
of  payment  be  specified  therein,  how  must  pre- 
sentment be  made? 

39-  Wlien  is  delay  in  making  presentment  excused? 

40-  What  is  the  rule  under  the  act  as  to  paper  falling 

due  on  Saturday? 

41-  What  is  the  rule  as  to  demand  paper  in  this 

respect  ? 

42-  What  is  the  result  of  making  an  instrument  pay- 

able at  a  bank  ? 

43-  What  constitutes  a  payment  in  due  course  ?    • 
44-§135.     May  notice  of  dishonor  be  given  by  an  agent — if 

so,  how? 

45-  When  it  is  given  by  or  on  behalf  of  a  party  en- 

titled to  give  notice,  what  is  the  result? 

46-  If  paper  be  dishonored  in  the  hands  of  an  agent, 

to  whom  may  he  give  notice,  and  what  is  the 
result? 

47-  If  a  party  be  dead  and  there  be  no  personal  repre- 

sentative or  he  cannot  be  found,  how  should 
notice  be  given  ? 

48-  Where  the  parties  live  in  the  same  place  can 

notice  by  mail  be  given,  and  wlien  must  it  bo  dv- 
posited? 


DEPARTMENT  OF  LAW  131 

49-  If  parties  live  in  different  localities  and  notice  is 

given  otherwise  than  by  mail,  what  is  the  rule 
as  to  time  ? 

50-  How  would  miscarriage  of  the  mails  affect  the  le- 

gality of  notice  so  given? 

51-  Does  failure  to  give  notice  of  dishonor  for  non- 

acceptance  prejudice  a  holder  in  due  course  sub- 
sequent to  the  omission? 

52-  Wliat  is  the  effect  of  a  waiver  written  in  the  body 

of  an  instrument? 

53-  ^When  will  a  waiver  affect  an  indorser  only? 
54-§136.     A^^at  act  under  this  law  will  discharge  an  instru- 
ment? 

55-  May  a  holder  renounce  his  rights  against  any 

party  to  the  instrument — if  so,  when? 

56-  What  is  its  effect  if  it  be  absolute  and  uncondi- 

tional as  to  the  principal  debtor,  and  when  must 
it  be  made  ? 

57-  What  is  its  effect  on  a  holder  in  due  course  with- 

out notice? 

58-  When  must  a  renunciation  be  in  writing? 

59-  If  an  instrument  or  a  signature  thereon  appear  to 

be  cancelled,  and  it  is  alleged  that  such  is  not 
really  the  case,  what  must  be  proved,  and  by 
whom  ? 

60-  State  the  material  alterations  of  an  instrument 
'  that  will  effect  a  discharge  of  it? 

61-  How  would  this  be  effected  by  the  fact  that  the 

instrument  is  in  the  hands  of  a  holder  in  due 
course,  and  what  must  he  show? 

62-  What  amount  ma}^  he  recover  thereon  in  such  a 

case  ? 
63-§137.     Who  is  the  ''referee  in  case  of  need"  under  this 

law? 
.  64-  What  option  has  the  holder  in  respect  to  such 

reference? 

65-  What  is  the  exception  as  to  presentment  for  ac- 

ceptance on  a  Saturday? 

66-  Can  an  acceptance  he  for  ]  art  of  a  bill  of  ex- 

change? 

67-  How  does  this  differ  from  a  regular  acceptance? 


132       AMERICAN  EXTENSION  UNIVERSITY 

68-  Where  there  has  been  acceptance  for  the  honor  of 

one  party,  may  there  also  be  a  further  accept- 
ance by  a  different  person,  for  the  honor  of 
another  party"? 

69-  What  is  the  result  of  the  refusal  of  a  holder  to 

receive  payment  supra  protest  ? 
70-§138.     In  what  way  does  the  act  apply  to  checks  ? 

71-  What  is  the  result  of  the  certification  of  checks  by 

the  banks  on  which  they  are  drawn? 

72-  Who  is  discharged  where  the  holder  procures  the 

certification  of  a  check? 


